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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION ANNNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period March 1, 1997 to December 31, 1997
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _______
Commission file number 333-29555
STC BROADCASTING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2676358
(State of Incorporation) (I.R.S. Employer Identification No.)
3839 4th Street N., Suite 420
St. Petersburg, FL 33703
(813) 821-7900
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 1, 1998, STC Broadcasting, Inc. had 1000 shares of common
stock par value $.01 issued and outstanding all of which is held by an affiliate
of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
None
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ITEM 1. BUSINESS
STC Broadcasting, Inc. (the "Company") was incorporated on November 1,
1996 and commenced operations on March 1, 1997. The Company is a wholly owned
subsidiary of Sunrise Television Corp. ("Sunrise") and currently owns and
operates five network affiliated broadcast stations located in five distinct and
geographically diverse markets outlined below:
<TABLE>
<CAPTION>
Network
Station Acquisition Date Market Affiliation
------- ---------------- ------ -----------
<S> <C> <C> <C>
WEYI-TV March 1, 1997 Flint, Saginaw-Bay City, Michigan NBC
WROC-TV March 1, 1997 Rochester, New York CBS
KSBW-TV March 1, 1997 Salinas and Monterey, California NBC
WTOV-TV March 1, 1997 Wheeling, West Virginia and
Steubenville, Ohio NBC
WJAC-TV October 1, 1997 Johnstown, Altoona, State College,
Pennsylvania NBC
</TABLE>
The Company acquired WEYI-TV ("WEYI"), WROC-TV ("WROC"), KSBW-TV
("KSBW") and WTOV-TV ("WTOV") (collectively, the "Jupiter/Smith Stations") from
Jupiter/Smith TV Holdings, L.P. ("Jupiter/Smith") and Smith Broadcasting
Partners, L.P. ("SBP") for approximately $163,000,000. SBP is a partnership
between Smith Broadcasting Group, Inc. ("SBG"), Sandy DiPasquale, John Purcell
and David Fitz. The majority owner of SBG is Robert Smith. These four
individuals operated the Jupiter/Smith Stations from January 1996 until the sale
to the Company on March 1, 1997. All four individuals continue as senior
management of the Company.
The Company acquired all of the outstanding stock of WJAC, Incorporated
on October 1, 1997 for approximately $36,000,000 including working capital of
$1,400,000. WJAC, Incorporated owned and operated WJAC-TV ("WJAC"), the NBC
affiliate for Johnstown, Pennsylvania. WJAC and the Jupiter/Smith Stations are
collectively identified as the "Stations".
The Company was organized by management and Hicks, Muse, Tate & Furst
Incorporated ("Hicks Muse") with the goal of becoming a leading owner and
operator of network-affiliated television broadcast stations, serving select
"middle-to-small markets" (i.e., those DMAs ranked from approximately 50 to 150
by the A.C.Nielsen Company ("Nielsen").
The five markets in which the Company currently operates offer
geographic diversity that reduces the impact on the Company of changes in
respective market economies and provide favorable competitive operating
environments. The Company believes that the Stations are well positioned to
achieve long-term growth in audience share and revenue share because of (i) the
limited competition for viewers from other over-the-air television broadcasters
in these markets, (ii) the strength of the Company's management and (iii) the
Stations' favorable and/or improving rankings within their DMAs. Management
believes that the limited number of other television broadcast stations in these
markets enables the Company to purchase syndicated programming at favorable
rates.
The following table summarizes additional information regarding each
Station and its respective designated market area ("DMA").
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<TABLE>
<CAPTION>
Year Ended
Number of December 31, 1997
Market Commercial Station Station Net % of
Station/Channel: DMA Revenue TV Stations Rank in Audience Revenues Total Net
DMA Rank (1) Rank (1) in DMA (1) DMA (2) Share (2) (in thousands) Revenues
- -------------------------------------------- -------- ----------- -------- --------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
WEYI/25:
Flint-Saginaw-Bay City, MI 63 70 4 3 12% $ 8,182 16.9%
WROC/8:
Rochester, NY ............ 75 62 4 3 17% $ 11,238 23.2%
WJAC/8:
Johnstown, PA ............ 92 111 4 1 21% $ 9,668 19.9%
KSBW/8:
Monterey-Salinas, CA ..... 121 70 6 1 20% $ 11,634 24.0%
WTOV/9:
Wheeling, WV-
Steubenville, OH ...... 138 148 2 1 23% $ 7,726 16.0%
</TABLE>
(1) BIA's Investing in Television 1997, 4th Edition
(2) As of November 1997, Sunday through Saturday 6 a.m to 2 a.m. Nielsen
Ratings
BUSINESS STRATEGY
The Company's business strategy is to acquire and operate television
broadcast stations and maximize operating cash flow through both revenue growth
and improved cost control. The Company believes that revenue growth and cost
control may be achieved simultaneously, principally because many of the costs
associated with operating a television station are fixed. The Company's
management team has successfully implemented this strategy with other television
broadcast stations as well as with the Stations. Key components of the Company's
business strategy include:
Management.
General managers are responsible for the day-to-day operations of their
respective stations. The Company believes that the autonomy of its station
management enables it to attract experienced managers capable of implementing
the Company's aggressive marketing strategy and reacting to competition in the
local markets. As an additional incentive, a portion of each manager's
compensation is based on the performance of the station for which he or she is
responsible.
Controlling Costs.
The Company seeks to selectively reduce costs at acquired stations
without adversely affecting growth. After acquiring a station, management
implements a cost control strategy stressing the elimination of unnecessary
costs, budgeting, accountability and disciplined credit and collection
procedures. Management believes that it can create an operating structure that
will profitably accommodate revenue growth.
Intensifying Sales Efforts.
The Company has implemented an aggressive approach to sales and
marketing designed to increase market revenue share. Management believes that
increases in revenue share are not necessarily dependent on increases in
audience share.
Building on Local News Franchises.
The Company seeks to increase revenues by developing a highly-rated,
well-differentiated local news product designed to build viewer loyalty and
target specific demographic audiences that appeal to advertisers.
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Managing Program Selection.
Each Station seeks to cost effectively purchase first-run and
off-network syndicated programming to target specific demographic audiences. The
Stations have been able to purchase syndicated programming at rates that
management believes are attractive, in part because of the limited competition
for such programming in the Stations' DMAs.
Positioning and Branding Stations.
The Company seeks to increase revenues by developing and maintaining a
unique, local "brand image" for each Station within its respective market with
which viewers and advertisers can identify. This strategy integrates local news,
programming, promotion and sales efforts for each Station based on its market's
demographics, competition, dynamics and opportunities.
Pursuing Selective Acquisitions.
The Company actively seeks to acquire television stations that
management believes can benefit from its business strategy. Targeted stations
generally have one or more of the following characteristics: (i) attractive
acquisition terms, which may include station-for-station exchanges; (ii)
opportunities to implement effective cost controls; (iii) opportunities for
increased advertising revenue; (iv) opportunities for increased audience share
through improved newscasts and programming; (v) limited competition from other
television broadcasters; and (vi) market locations that possess attractive
projected growth in advertising revenues. The Company generally targets
network-affiliated stations, which typically have established audiences for
their news, sports and entertainment programming, located in DMAs generally
ranked from 50 to 150. Management believes that these stations can achieve
operating margins comparable to larger market stations, yet may be purchased for
lower multiples of cash flow. The Company believes that because of the limited
competition from other television broadcasters in these middle-to-small markets,
there is an opportunity for local stations to attract large local audience share
and thus compete successfully for advertising revenues with alternative media,
such as cable television, radio and newspapers.
NETWORK AFFILIATIONS.
Each of the Stations is affiliated with a major broadcast network
pursuant to a long-term affiliation agreement. Each affiliation agreement
generally provides the Station with the right to broadcast all programs
transmitted by the network with which the Station is affiliated. In return, the
network has the right to sell nearly all of the advertising time during its
broadcasts and pays a specified network compensation fee to the Station. These
payments are subject to increase or decrease by the network during the term of
an affiliation agreement with provisions for advance notice and a right of
termination by the Station in the event of a reduction. The agreements are
generally for 10-year terms and contain customary renewal provisions, which
generally provide for automatic renewal for successive terms, subject to either
party's right to terminate the agreement at the end of any term upon proper
notice. WROC's network affiliation agreement with CBS expires on January 31,
2005, and WEYI's, KSBW's, WTOV's and WJAC's network affiliation agreements with
NBC expire on December 31, 2005, December 31, 2005, January 1, 2002 and October
31, 2004, respectively. In addition, WTOV has a secondary network affiliation
agreement with ABC that provides WTOV the right of first refusal to carry
certain ABC programming events in WTOV's market. This secondary network
affiliation agreement may be terminated at any time by either party upon notice.
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ADVERTISING SALES
General.
Television station revenues are primarily derived from the sale of
local and national advertising. Advertising rates are based upon a program's
popularity among the viewers that an advertiser wishes to target, the number of
advertisers competing for the available time, the size and the demographic
composition of the market served by the station, the availability of alternative
advertising media in the market area and the effectiveness of the stations'
sales force. Advertising revenues are positively affected by strong local
economies, national and regional political election campaigns and certain events
such as the Olympic Games or the Super Bowl. Consequently, because television
broadcast stations rely on advertising revenues, declines in advertising
budgets, particularly in recessionary periods, adversely affect the broadcast
industry, and as a result may contribute to a decrease in the revenues of
broadcast television stations. The Company seeks to manage its advertising spot
inventory efficiently to maximize advertising revenues and return on programming
costs.
Local Sales.
Approximately 56.2% of gross broadcast revenues (excluding political
advertising) in 1997 came from the sale of local advertising time. Local
advertising time is sold by each Station's local sales staff who call upon
advertising agencies and local businesses, which typically include car
dealerships, retail stores and restaurants. Compared to revenues from national
advertising accounts, revenues from local advertising generally are more stable
and, due to a lower cost of sales, more profitable. The Company seeks both to
attract new advertisers to television and to increase the amount of advertising
time sold to existing local advertisers by relying on experienced local sales
forces with strong community ties, producing news and other programming with
local advertising appeal and sponsoring or co-promoting local events and
activities. The Company places a strong emphasis on experience of its local
sales staff and maintains an on-going training program for sales personnel. To
increase accountability of the Stations' sales forces, management has
implemented initiatives whereby sales managers are responsible for the effective
management of commercial inventory using input from account executives who are
responsible for preparing detailed reports and projections.
National Sales.
Approximately 43.8% of gross broadcast revenues (excluding political
advertising) in 1997 came from the sale of national advertising time. National
advertising time is sold through national sales representative firms retained by
the Company, which firms call upon businesses, which typically include
automobile manufacturers and dealer groups, telecommunications companies, fast
food franchisers and national retailers (all of which may advertise locally).
Each Station has a sales manager assigned to work with the national sales
representative to increase advertising expenditures with the Stations.
RATINGS
The price of advertising spots is determined in part by a station's
overall ratings and share in a given market, as well as a station's rating among
the particular demographic group that an advertiser may be targeting. There are
211 generally-recognized television "markets" or DMAs in the United States,
which are ranked in size according to various factors based upon actual or
potential audience. Each market is defined as an exclusive geographic area
consisting of all counties in which the home-market commercial stations receive
the greatest percentage of total viewing hours. Currently, Nielsen periodically
publishes data on estimated audiences for the television stations in the various
markets throughout the country. The estimates are expressed in
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terms of the percentage of the total potential audience in a market viewing a
particular station (the station's "rating") and the percentage of households
actually viewing television (the station's "share"). In the Stations' DMAs,
Nielsen measures viewership by periodic surveys of selected television viewers
through a manual diary system.
INDUSTRY BACKGROUND
General.
Commercial television broadcasting began in the United States on a
regular basis in the 1940s over a portion of the broadcast spectrum commonly
known as the "VHF Band" (very-high frequency broadcast channels numbered 2
through 13). Television channels were later assigned by the FCC under additional
broadcast spectrum commonly known as the "UHF Band" (ultra-high frequency
broadcast channels numbered 14 through 83; channels 70 through 83 have since
been reallocated to non-broadcast services). The license to operate a broadcast
station is granted by the FCC, and due to spacing requirements and other
considerations, the number of licenses allocated to any one market is limited.
Although UHF and VHF stations compete in the same market, UHF stations
historically have suffered a competitive disadvantage, in part because (i)
receivers of many households were originally designed only for VHF reception,
(ii) UHF signals were more affected by terrain and other obstructions than VHF
signals and (iii) VHF stations were able to provide higher quality signals to a
wider area. This historic disadvantage of UHF stations has gradually declined
through (a) carriage on cable system, (b) improvements in television receivers,
(c) improvement in television transmitters, (d) wider use of all channel
antennae, (e) increase availability of programming and (f) the development of
new networks such as Fox and UPN.
All television stations throughout the United States are grouped into
211 generally recognized DMAs, which are ranked in size according to various
formulae based upon actual or potential audience. Each DMA is defined as an
exclusive geographic area consisting of all counties in which the home-market
commercial stations receive the greatest percentage of total viewing hours.
Television Networks.
A majority of commercial television stations in the United States are
affiliated with ABC, CBS, FOX or NBC. ABC, CBS and NBC provide the majority of
its affiliates' programming each day without charge in exchange for nearly all
of the available advertising time in the programs supplied and sells this
advertising time and retains the revenues. The affiliate receives compensation
from the three networks and retains the revenue from time sold by the affiliate
during breaks in and between network programs and in programming the affiliate
produces or purchases from non-network sources.
Fox has established an affiliation of independent stations which
operates on a basis similar to ABC, CBS and NBC. However, the number of hours
per week of programming supplied by Fox to its affiliates is significantly less
than the number of hours supplied by ABC, CBS and NBC and the network
compensation is normally less. As a result, Fox affiliates retain a
significantly higher portion of the available inventory of broadcast time for
their own use.
In contrast to stations affiliated with Major Networks, an independent
station supplies over-the-air programming through the acquisition of broadcast
programs through syndication. This syndicated programming is generally acquired
by the independent stations for cash and occasionally barter. Independent
stations that acquire a program through syndication are usually given exclusive
rights to show the program in the station's market for either a period of years
or a number of
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episodes agreed upon between the independent station and the syndicator of the
programming. Type of syndicated programs aired on the independent stations
include feature films, popular series previously shown on network television and
series produced for direct distribution to television stations.
During 1994, UPN established an affiliation of independent stations
that began broadcasting in January 1995 and operates on a basis similar to Fox.
However, UPN currently supplies fewer hours of programming per week to its
affiliates than Fox. As a result, UPN affiliates retain a significantly higher
portion of the available inventory of broadcast time for their own use than
affiliates of Fox or the Major Networks. UPN has indicated its intention to
increase the amount of programming supplied to its affiliates. In 1994, WB
announced its intention to establish separate affiliations of independent
television stations similar to UPN, and began broadcasting in January 1995.
Television Advertising.
Television stations derive their revenues primarily from the sale of
local and national advertising. All network-affiliated stations, including those
affiliated with Fox and others, are required to carry spot advertising sold by
their networks. This reduces the amount of advertising available for sale by the
stations. Network affiliates are generally compensated for the broadcast of
network programming according to a formula. Stations directly sell all of the
remaining advertising to be inserted in network programming and all of the
advertising in non-network programming, retaining all of the revenues received
from these sales of advertising, less any commissions paid. Through barter and
cash-plus-barter arrangements, however, a national syndicated program
distributor typically retains a portion of the available advertising time for
programming it supplies, in exchange for no or reduced fees to the stations for
such programming.
Advertisers wishing to reach a national audience usually purchase time
directly from the Major Networks, Fox, UPN or WB, or advertise nationwide on an
ad hoc basis. National advertisers who wish to reach a particular region or
local audience often buy advertising time directly from local stations through
national advertising sales representative firms. Additionally, local businesses
purchase advertising time directly from the stations' local sales staffs.
Advertising rates are based upon factors that include the size of the DMA in
which the station operates, a program's popularity among the viewers that an
advertiser wishes to attract, the number of advertisers competing for the
available time, the demographic characteristics of the DMA served by the
station, the availability of alternative advertising media in the DMA,
aggressive and knowledgeable sales forces and development of projects, features
and marketing programs that tie advertiser messages to programming. Because
broadcast television stations rely on advertising revenues, declines in
advertising budgets particularly in recessionary periods, will adversely affect
the broadcast business. Conversely, increases in advertising budgets targeting
specific demographic groups are based upon the superior coverage of broadcast
television stations or the dominant competitive position of a particular station
and may contribute to an increase in the revenues and operating cash flow of a
particular broadcast television station.
Television Viewing Audience.
Nielsen is a national audience measuring service that periodically
publishes data on estimated audiences for television stations in various DMAs
throughout the country. The estimates are expressed in terms of the percentage
of the total potential audience in the DMA viewing a station, referred to as the
station's "rating," and of the percentage of the audience actually watching the
television station, referred to as the station's "share." This rating service
provides such data on the basis of total television households and of selected
demographic groupings in the media markets being measured. Nielsen uses one of
two methods of measuring the station's actual viewership. In larger DMAs,
ratings are determined by a combination of meters connected directly to
selected
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television sets and periodic surveys of television viewing, while in smaller
DMAs only periodic surveys are completed. In 1997, all of the DMAS in which the
Company operated were survey markets.
COMPETITION
Competition in the television industry exists on several levels,
including competition for audience, advertisers and programming (including local
news). Competition is continually affected by technological change and
innovation, fluctuation in the popularity of competing entertainment and
communications media (including newspapers, magazine and direct mail), and
governmental restrictions or actions by Congress and federal regulatory bodies
including the FCC and the Federal Trade Commission), any of which could have a
material adverse effect on the Company's operations. Competition in the
television broadcasting industry occurs primarily in individual DMAs. Generally,
a television broadcast station in one DMA does not compete with television
broadcast stations in other DMAs. Certain competitors are part of large
organizations with substantially greater financial, technical and other
resources than the Company.
Audience.
Stations compete for audience share primarily on the basis of program
popularity which has a direct effect on advertising rates. A large amount of the
Stations' prime time programming is supplied by NBC and CBS and is therefore
dependent upon the performance of such network programs in attracting viewers.
Non-network time periods are programmed by the Station primarily with syndicated
programs purchased for cash, cash and barter or barter-only, and through
self-produced news, public affairs and other entertainment programming.
The development of methods of television transmission other than
over-the-air broadcasting, and in particular the growth of cable television, has
significantly altered competition for audience share in the television industry.
These other transmission methods can increase competition faced by a broadcast
station by bringing into its market distant broadcasting signals not otherwise
available to the station's audience and by serving as a distribution system for
programming that originates on the cable system.
Other sources of competition for audience include home entertainment
systems (including video cassette recorder and playback systems, videodiscs and
television game devices), low-power television multipoint distribution system,
multichannel multipoint distribution systems, wireless cable, internet services,
satellite master antenna television systems and some low-power, in-home
satellite services. In addition, telephone companies may provide channels for
program suppliers to deliver video programming to the home an arrangement that
the FCC calls "video dial tone". The Company's television stations face
competition from high-powered direct broadcast satellite services that transmit
programming directly to homes equipped with special receiving antennas or to
cable television systems for transmission to their subscribers. Various
television stations and networks have recently filed suit in federal court
against certain providers of direct broadcasts satellite service. The suits
allege that such DBS providers have impermissibly distributed the signals of
distant over-the-air television stations over their systems, in violation of the
Satellite Home Viewer Act. The suits are presently pending.
Further advances in technology may increase competition for household
audiences and advertisers. Video compression techniques, now under development
for use with current cable channels and direct broadcast satellites, are
expected to reduce the bandwidth required for television signal transmission.
These compression techniques, as well as other technological developments, are
applicable to all video delivery systems, including over-the-air broadcasting,
and have the potential to provide vastly expanded programming to highly targeted
audiences. Reduction in the cost of creating additional channel capacity could
lower entry barriers for new channels and
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encourage the development of increasingly specialized "niche" programming. This
ability to reach very defined audiences may alter the competitive dynamics for
advertising expenditures. The Company is unable to predict the effect that
technological changes will have on the broadcast television industry or the
future results of the Company's operations.
Advertising.
Advertising revenues and advertising rates are based upon factors that
include the size of the DMA in which the station operates, a program's
popularity among the viewers that an advertiser wishes to attract, the number of
advertisers competing for the available time, the demographic makeup of the DMA
served by the station, the availability of alternative advertising media in the
DMA, aggressive and knowledgeable sales forces and developments of projects,
features and programs that tie advertiser messages to programming.
Prior to and through the 1970s, over-the-air television broadcasting
enjoyed virtual dominance in viewership and television advertising revenues
because over-the-air television stations compete only with each other in most
local markets. Although cable television systems were initially used to
retransmit broadcast television programming to paid subscribers in areas with
poor broadcast signal reception, significant increases in penetration into homes
did not occur until the 1970s and 1980s, notwithstanding signal reception
problems. As the technology of satellite program delivery to cable systems
advanced in the late 1970s, development of programming for cable television
accelerated dramatically, resulting in the emergence of multiple national-scale
program alternatives and the rapid expansion of cable television and higher
subscriber growth rates. Historically, cable operators generally have not sought
to compete with over-the-air broadcast stations for a share of the local news
audience in the size of markets that the Company targets. To the extent they
elect to do so, increased competition from cable operators for local news
audiences could have a material adverse effect on the Company's advertising
revenues.
Cable television penetration in the Flint, Rochester, Monterey-Salinas,
Wheeling-Steubenville and Johnstown markets is 66%, 73%, 78%, 77% and 80%,
respectively, according to the November 1997 Nielsen Television Market Report.
The Stations have elected both must-carry and retransmission consent rights in
connection with their carriage by local cable providers. Cable-originated
programming has emerged as a competitor for viewers of over-the-air broadcast
television programming, although no single cable programming network regularly
attains audience levels amounting to more than a small fraction of any
over-the-air programming. Since 1980, the advertising share of cable networks
has increased significantly. Notwithstanding such increases, in cable viewership
and advertising, over-the-air broadcasting remains the dominant distribution
system for mass market television advertising.
Programming.
The Company competes for programming, which involves negotiating with
national program distributors or syndicators that sell first-run and rerun
packages of programming. The Stations compete for exclusive access to those
programs against in-market broadcast station competitors for syndicated
products. Cable systems generally do not compete with local stations for
programming, although various national cable networks have become more active in
acquiring programs that would have otherwise been offered to local television
stations.
Other factors that are material to a television station's competitive
position include signal coverage, local program acceptance, network affiliation,
audience characteristics and assigned broadcast frequency. In addition, the
broadcasting industry is continuously faced with technological change and
innovation, the possible rise in popularity of competing entertainment and
communications media, and governmental restrictions or actions of federal
regulatory bodies, including the FCC and the Federal Trade Commission any of
which could possibly have a material
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effect on the Company's operations and results.
FEDERAL REGULATION OF TELEVISION BROADCASTING
General.
The ownership, operation and sale of television stations are subject to
the jurisdiction of the FCC which acts under authority granted by the
Communications Act of 1934, as amended. Among other things, the FCC assigns
frequency bands for broadcasting; determines the particular frequencies,
locations and operating power of stations; issues, renews, revokes and modifies
station licenses; regulates equipment used by stations; adopts and implements
regulations and policies that directly or indirectly affect the ownership,
operation and employment practices of stations; and has the power to impose
penalties for violations of its rules or the Communications Act.
The following is a brief summary of certain provisions of the
Communications Act, the Telecommunications Act of 1996 (the "Telecommunications
Act") and specific FCC regulations and policies. Reference should be made to the
Communications Act, the Telecommunications Act, FCC rules and the public notices
and rulings of the FCC for further information concerning the nature and extent
of federal regulation of broadcast stations.
License Grant and Renewal.
Television stations operate pursuant to broadcasting licenses that, in
the past, usually were granted by the FCC for terms of five years. However, in
January 1997, pursuant to the terms of the Telecommunications Act, the FCC
increased the terms of such licenses and their renewal to eight years.
Television licenses are subject to renewal upon application to the FCC.
Under the Telecommunications Act, the FCC is required to grant the renewal
application if it finds (i) that the station has served the public interest,
convenience and necessity; (ii) that there have been no serious violations by
the licensee of the Communications Act or the rules and regulations of the FCC;
and (iii) there have been no other violations by the licensee of the
Communications Act or the rules and regulations of the FCC that, when taken
together, would constitute a pattern of abuse.
All of the Stations are presently operating under regular licenses with
terms expiring as follows: October 1, 1997 (WEYI), June 1, 1999 (WROC), December
1, 1998 (KSBW) April 1, 1999 (WJAC) and October 1, 2005 (WTOV). An application
for renewal of license for WEYI was timely filed and is pending. Until such time
as the application is acted upon, the Company is authorized to continue
operating the station. There can be no assurance that the licenses of such
stations will be renewed.
Ownership Matters
General.
The Communications Act prohibits the assignment of a broadcast license
or the transfer of control of a broadcast licensee without the prior approval of
the FCC. The FCC generally applies its ownership limits to "attributable"
interests held by an individual, corporation, partnership or other association.
In the case of corporations holding, or through subsidiaries controlling,
broadcast licenses, the interest of officers, directors and those who, directly
or indirectly, have the right to vote 5% or more of the corporation's stock (or
10% or more of such stock in the case of insurance companies, investment
companies and bank trust departments that are passive investors) are generally
attributable, except that, in general, no minority voting stock interest will be
attributable if
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there is a single holder of more than 50% of the outstanding voting power of the
corporation. In addition, under its "cross-interest" policy, the FCC considers
and may prohibit the common ownership of an attributable interest in one media
outlet and a non-attributable but significant equity interest in another media
outlet in the same market, joint ventures, and common key employees among
competitors, if it determines that such relationships could have a significant
adverse effect upon economic competition and viewpoint diversity. The FCC has a
pending rulemaking proceeding that, among other things, seeks comment on whether
the FCC should modify its attribution rules by (i) raising the voting stock
attribution benchmark from 5% to 10%; (ii) raising the attribution benchmark for
passive investors from 10% to 20%; and (iii) attributing certain interests held
by limited liability companies in certain circumstances. The FCC also has
solicited comment on proposed rules that would (i) treat an otherwise
nonattributable equity or debt interest in a licensee as an attributable
interest where the interest holder is a program supplier or the owner of a
broadcast station in the same market and the equity and / or debt holding is
greater than a specified benchmark; (ii) treat a licensee of a television
station which, under a "local marketing agreement" or "LMA," brokers more than
15% of the time on another television station serving the same market, as having
an attributable interest in the brokered station; and (iii) in certain
circumstances, treat the licensee of a broadcast station that sells advertising
time on another station in the same market pursuant to a "joint sales
agreement," or "JSA," as having an attributable interest in the station whose
advertising is being sold. The FCC also has sought comment on, among other
things, (i) whether the cross-interest policy should be applied only in smaller
markets, and (ii) whether non-equity financial relationships such as debt, when
combined with multiple business interrelationships such as LMAs and JSAs, raise
concerns under the cross-interest policy.
The Communications Act prohibits the issuance of broadcast licenses to,
or the holding of a broadcast license by, any corporation of which more than 20%
of the capital stock is owned of record or voted by non-U.S. citizens or their
representatives or by a foreign government or a representative thereof, or by
any corporation organized under the laws of a foreign country (collectively,
"Aliens"). The Communications Act also authorizes the FCC , if the FCC
determines that it would be in the public interest, to prohibit the issuance of
a broadcast license to, or the holding of a broadcast license by, any
corporation directly or indirectly controlled by any other corporation of which
more than 25% of the capital stock is owned of record or voted by Aliens. The
FCC has issued interpretations of existing law under which these restrictions in
modified form apply to other forms of business organizations, including
partnerships. The Company and its subsidiaries are domestic corporations, and
the Company's ultimate controlling stockholder is a United States citizen. The
Articles of Incorporation of the Company contain limitations on Alien ownership
and control that are substantially similar to those contained in the
Communications Act. Pursuant to the Articles of Incorporation, the Company has
the right to repurchase Alien-owned shares at their fair market value to the
extent necessary, in the judgment of the Board of Directors, to comply with the
Alien ownership restrictions.
National Ownership Rule.
Under the FCC's rules, an individual or entity may own an unlimited
number of television stations nationwide, subject to the restriction that no
individual or entity may have an attributable interest in television stations
reaching more than 35% of the national television viewing audience.
Historically, VHF stations have shared a larger portion of the market than UHF
stations. Therefore, only half of the households in the market area of any UHF
station are included when calculating whether an entity or individual owns
television stations reaching more than 35% of the national television viewing
audience. Of the Stations, four are VHF and one is UHF.
Duopoly Rule.
Unless applicable waiver standards are met, the television "duopoly"
rule generally prohibits
11
<PAGE> 12
a single individual or entity from having an attributable interest in two or
more television stations with overlapping Grade B service areas. The FCC has
pending a rulemaking proceeding in which it has proposed to modify the
television duopoly rule to permit the common ownership of television stations in
different DMAs, so long as the Grade A service contours of the stations do not
overlap. Pending resolution of its rulemaking proceeding, the FCC has adopted an
interim waiver policy that permits the common ownership of television stations,
such as KRBC-TV and KACB-TV, which are located in different DMAs and whose Grade
A service contours do not overlap, conditioned on the final outcome of the
rulemaking proceeding. The FCC has also sought comment on whether common
ownership of two television stations in a market should be permitted (i) where
one or more of the commonly owned stations is UHF, (ii) where one of the
stations is in bankruptcy or has been off the air for a substantial period of
time or (iii) where the commonly owned stations have very small audience or
advertising shares, are located in a very large market, and / or a specified
number of independently owned media voices would remain after the acquisition.
Radio/Television Cross-Ownership Rule.
The FCC's radio/television cross-ownership rule (the "one to a market"
rule) generally prohibits a single individual or entity from having an
attributable interest in a television station and a radio station serving the
same market. However, in each of the 25 largest local markets in the United
States, provided that there are at least 30 separately owned stations in the
particular market, the FCC policy presumptively allows waivers of the rule to
permit the common ownership of one AM, one FM and one TV station in a market.
The Telecommunications Act directs the FCC to extend this policy to each of the
top 50 markets. The FCC has pending a rulemaking proceeding in which it has
solicited comment on whether the one to a market rule should be modified or
eliminated.
The FCC does not apply its presumptive waiver policy in cases involving
the common ownership of one television station and two or more radio stations in
the same service (AM or FM), in the same market. Pending its rulemaking
proceeding to reexamine the one to a market rule, the FCC has stated that it
will consider requests for waivers of the rule in such instances on a
case-by-case basis. Waivers that have been granted on this basis also have been
conditioned on the outcome of the rulemaking proceeding.
As a result of the one to a market rule, the attributable radio
interests of persons with attributable interests in the Company limit the
markets where the Company may acquire or own television stations. Thomas O.
Hicks, for example, who is the Company's ultimate controlling stockholder, holds
attributable interests in various entities, such as Capstar, Chancellor and
GulfStar Communications, Inc., which companies own radio stations in various
markets throughout the United States.
Local Television/Cable Cross-Ownership Rule.
While the Telecommunications Act eliminated a previous statutory
prohibition against the common ownership of a television broadcast station and a
cable system that serves the same local market, the Telecommunications Act left
a similar FCC rule in place. The legislative history of the Act indicates that
its repeal of the statutory ban should not prejudge the outcome of any FCC
review of the rule.
Television/Daily Newspaper Cross-Ownership Rule.
The FCC's rules prohibit the common ownership of a television broadcast
station and a daily newspaper in the same market.
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<PAGE> 13
Expansion of the Company's television operations on both a local and
national level will continue to be subject to the FCC's ownership rules and any
changes the FCC or Congress may adopt. Concomitantly, any further relaxation of
the FCC's ownership rules may increase the level of competition in one or more
of the markets in which the Company's stations are located, more specifically to
the extent that any of the Company's competitors may have greater resources and
thereby be in a superior position to take advantage of such changes.
Other Matters
Must Carry-Retransmission Consent.
Pursuant to the Cable Act of 1992, television broadcasters are required
to make triennial elections to exercise either certain "must carry" or
"retransmission consent" rights in connection with their carriage by cable
systems in each broadcaster's local market. By electing must-carry rights, a
broadcaster demands carriage on a specified channel on cable systems within its
Area of Dominant Influence ("ADI"), in general as defined by the Arbitron
1991-92 Television Market Guide. These must carry rights are not absolute, and
their exercise is dependent on variables such as (i) the number of activated
channels on a cable system; (ii) the location and size of a cable system; and
(iii) the amount of programming on a broadcast station that duplicates the
programming of another broadcast station carried by the cable system. Therefore,
under certain circumstances, a cable system may decline to carry a given
station. Alternatively, if a broadcaster chooses to exercise retransmission
consent rights, it can prohibit cable systems from carrying its signal or grant
the appropriate cable system the authority to retransmit the broadcast signal
for a fee or other consideration.
The most recent election date for must-carry or retransmission consent
was October 1, 1996, such election to be effective for the three-year period
from January 1, 1997 through December 31, 1999. For subsequent elections
beginning with the election to be made by October 1, 1999, the must carry market
will be the station's DMA, in general as defined by the Nielsen DMA Market and
Demographic Rank Report of the prior year.
Digital Television.
The FCC has taken a number of steps to implement digital television
service ("DTV") (including high-definition) in the United States. In December
1996, the FCC adopted a DTV broadcast standard. On April 3, 1997, the FCC
adopted a table of digital channel allotments and rules for the implementation
of DTV. The digital table of allotments provides each existing television
station licensee or permittee with a second broadcast channel to be used during
the transition to DTV, conditioned upon the surrender of one of the channels at
the end of the DTV transition period. Implementation of DTV will improve the
technical quality of television. Furthermore, the implementing rules permit
broadcasters to use their assigned digital spectrum flexibly to provide either
standard or high definition video signals and additional services, including,
for example, data transfer, subscription video, interactive materials, and audio
signals subject to the requirement that they continue to provide at least one
free, over the air television service. However, the digital table of allotments
was devised on the basis of certain technical assumptions which have not been
subjected to extensive field testing and which, along with specific digital
channel assignments, are the subject of petitions for reconsideration of the
FCC's April 3, 1997 decision. Conversion to DTV may reduce the geographic reach
of the Company's stations or result in increased interference, with, in either
case, a corresponding loss of population coverage. DTV implementation will
impose additional costs on the Company, primarily due to the capital costs
associated with construction of DTV facilities and increased operating costs
both during and after the transition period. In addition, the Telecommunications
Act requires the FCC to assess and collect a fee for any use of a broadcaster's
DTV channel for which it receives subscription fees or other compensation other
than advertising revenue. The FCC has pending a rulemaking proceeding to
implement this requirement.
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<PAGE> 14
The FCC has set a target date of 2006 for expiration of the transition period,
subject to biennial reviews to evaluate the progress of DTV, including the rate
of consumer acceptance. Management of the Company believes that its conversion
to DTV will commence in 1999 for the Company's larger markets and in 2000 for
the Company's smaller markets. Future capital expenditures by the Company will
be compatible with the new technology whenever possible.
Programming and Operation.
General.
The Communications Act requires broadcasters to serve the "public
interest." The FCC has relaxed or eliminated many of the more formalized
procedures it had developed in the past to promote the broadcast of certain
types of programming responsive to the needs of a station's community of
license. FCC licensees continue to be required, however, to present programming
that is responsive to community issues, and to maintain certain records
demonstrating such responsiveness. Complaints from viewers concerning a
station's programming often will be considered by the FCC when it evaluates
renewal applications of a licensee, although such complaints may be filed at any
time and generally may be considered by the FCC at any time. Stations also must
pay regulatory and application fees, and follow various rules promulgated under
the Communications Act that regulate, among other things, political advertising,
sponsorship identifications, the advertisement of contests and lotteries,
obscene and indecent broadcasts, and technical operations, including limits on
radiofrequency radiation. In addition, licensees must develop and implement
affirmative action programs designed to promote equal employment opportunities,
and must submit reports to the FCC with respect to these matters on an annual
basis and in connection with a renewal application. Failure to observe these or
other rules and policies can result in the imposition of various sanctions,
including monetary forfeitures, or the grant of a "short" (i.e., less than the
full) license renewal term or, for particularly egregious violations, the denial
of a license renewal application or the revocation of a license.
Children's Television Programming.
Pursuant to legislation enacted in 1991, the amount of commercial
matter broadcast during programming designed for children 12 years of age and
younger has been limited to 12.0 minutes per hour on weekdays and 10.5 minutes
per hour on weekends. In addition, all television stations have been required to
broadcast some television programming designed to meet the educational and
informational needs of children 16 years of age and under. The legislation and
FCC rules also limit the amount of commercial matter that may be broadcast
during children's programming. In August 1996, the FCC adopted new rules setting
forth more stringent children's programming requirements. Specifically,
television stations are now required to broadcast a minimum of three hours per
week of "core" children's educational programming, which the FCC defines as
programming that (i) has serving the educational and informational needs of
children 16 years of age and under as a significant purpose; (ii) is regularly
scheduled, weekly and at least 30 minutes in duration; and (iii) is aired
between the hours of 7:00 a.m. and 10:00 p.m. Furthermore, "core" children's
educational programs, in order to qualify as such, must be identified as
educational and informational programs over the air at the time they are
broadcast, and must be identified in the station's children's programming
reports required to be placed in stations' public inspection files.
Additionally, television stations must identify and provide information
concerning "core" children's programming to publishers of program guides and
listings. A television station found not to have complied with the "core"
programming requirements or the children's commercial limitations could face
sanctions, including monetary fines and the possible non-renewal of its
broadcasting license.
Television Violence.
The Telecommunications Act directed the broadcast and cable television
industries to
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<PAGE> 15
develop and transmit an encrypted rating in all video programming that, when
used in conjunction with so-called "V-Chip" technology, would permit the
blocking of programs with a common rating. In January 1997, an industry proposal
was submitted to the FCC describing a voluntary ratings system under which all
video programming would be designated in one of six categories. The proposal was
revised and resubmitted in August 1997. Pursuant to the Telecommunications Act,
the FCC has initiated a proceeding to determine whether to accept the industry
proposal or to establish and implement an alternative system for rating and
blocking video programming. The FCC has begun a separate proceeding to address
technical issues related to the "V-Chip." The Company cannot predict whether the
FCC will accept the industry proposal regarding the rating and blocking of video
programming, or how changes in this proposal could affect the Company's
business.
Closed Captioning.
Under the FCC's closed captioning rules, which became effective January
1, 1998, program distributors including television stations, are generally
responsible for compliance with captioning rules. However, stations may demand
certifications from program suppliers that programming meets the minimum
captioning requirements. The rules divide programming into two groups: pre-rule
programming (which is defined to be programming that was first published or
exhibited on or before January 1, 1998 by any distribution method) and new
programming (programming that was first published or exhibited after that date).
Pre-rule programming is subject to no specific requirements until the first
calendar quarter of 2008. In that quarter, 75% of all pre-rule programming
actually aired is required to be captioned. Beginning in the first calendar
quarter of 2000, new programming that is not otherwise exempt from captioning
requirements is subject to a series of quarterly benchmarks, until by January 1,
2006, 95% of all new non-exempt programming is to be captioned.
Proposed Changes.
The Congress and the FCC have under consideration, and in the future
may consider and adopt, new laws, regulations and policies regarding a wide
variety of matters that could affect, directly or indirectly, the operation,
ownership and profitability of the Company's broadcast stations, result in the
loss of audience share and advertising revenues for the Stations, and affect the
ability of the Company to acquire additional broadcast stations or finance such
acquisitions. In addition to the changes and proposed changes noted above, such
matter include, for example, spectrum use fees, political advertising rates,
potential restrictions on the advertising of certain products (beer, wine and
hard liquor, for example), and the rules and policies to be applied in enforcing
the FCC's equal employment opportunity regulations. Other matters that could
affect the Company's broadcast properties include technological innovations and
developments generally affecting competition in the mass communications
industry, such as direct radio and television broadcast satellite service, the
continued establishment of wireless cable systems and low power television
stations, digital television and radio technologies, and the advent of telephone
company participation in the provision of video programming service.
Other Considerations.
The foregoing summary does not purport to be a complete discussion of
all provisions of the Communications Act or other congressional acts or of the
regulations and policies of the FCC. For further information, reference should
be made to the Communications Act, other congressional acts, and regulations and
public notices promulgated from time to time by the FCC. There are additional
regulations and policies of the FCC and other federal agencies that govern
political broadcasts, public affairs programming, equal opportunity employment
and other matters affecting the Company's business and operations.
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<PAGE> 16
EMPLOYEES
As of December 31, 1997, the Stations had approximately 376 full-time
and 37 part-time employees. WEYI has a contract with United Auto Workers that
expires on August 7, 1998 with respect to 50 employees. WROC has a contract with
American Federation of Television and Radio Artists ("AFTRA") that expires on
March 2, 1999 with respect to 19 employees, and has entered into a contract
with the National Association of Broadcast Employees and
Technicians/Communications Workers of America ("NABET") that expires on May 31,
2000 with respect to 30 employees. WTOV has a contract with AFTRA that expires
January 28, 1999 and a contract with International Brotherhood of Electrical
Workers that expires on November 30, 2000 with respect to 22 and 15 employees
respectively. WJAC has a contract with International Alliance of Theatrical
Stage Employees that expires on September 30, 2002 with respect to 38 employees.
No significant labor problems have been experienced by the Stations. The Company
considers its overall labor relations to be good. However, there can be no
assurance that the Company's collective bargaining agreements will be renewed in
the future or that the Company will not experience a prolonged labor dispute,
which could have a material adverse effect on the Company's business, financial
condition or results of operations.
PENDING ACQUISITIONS
On July 8, 1997, the Company entered into a purchase agreement ("ARTC
Purchase Agreement") with Abilene Radio and Television Company ("ARTC") to
acquire all of its outstanding common stock. ARTC owns KRBC-TV, channel 9, the
NBC affiliate for Abilene, Texas, and KACB-TV, channel 3, the NBC affiliate for
San Angelo, Texas. On December 30, 1997, the Company and ARTC entered into an
amendment to the ARTC Purchase Agreement that adjusted the purchase price to
$7,250,000 plus working capital. The transaction is expected to close on March
31, 1998. The ARTC Purchase Agreement is subject to customary conditions and no
assurances can be given as to whether, or on what terms, such transaction will
be consummated by the Company.
Unless applicable waiver standards are met, the FCC has a duopoly rule
which generally prohibits a single individual or entity from having an
attributable interest in two or more television stations with overlapping Grade
B service areas. The FCC has pending a rulemaking proceeding in which it has
proposed to modify the television duopoly rule to permit the common ownership of
television stations in different DMAs, so long as the Grade A service contours
of the stations do not overlap. On February 12,1998, the FCC conditioned the
transfer grant of the ARTC stations to the Company on the outcome of its
rulemaking proceedings. If the final ruling is adverse to the Company, the
Company would be required to sell one of the two stations to an unrelated party.
There can be no assurance as to the terms of such sales or that such sale would
not have a material adverse effect on the Company's business, financial
condition and results of operations.
In a series of transactions, the Company will acquire certain assets
from Hearst-Argyle Television, Inc., ("Hearst") through transactions structured
as a Section 1031 tax deferred exchange of assets. On February 3, 1998, the
Company agreed to acquire WPTZ-TV ("WPTZ"), WNNE-TV ("WNNE"), and a LMA for
WFFF-TV ("WFFF") from Sinclair Broadcast Group, Inc. for $72.0 million, with the
intention of using these assets in the Hearst transaction. WPTZ and WNNE are the
NBC affiliates and WFFF is the Fox affiliate serving the Burlington, Vermont and
Plattsburgh, New York television market. On February 18, 1998, the Company
agreed with Hearst-Argyle Television, Inc. to trade KSBW-TV, WPTZ, and WNNE for
WDTN-TV, the ABC affiliate in Dayton, Ohio, WNAC-TV, the Fox affiliate in
Providence, Rhode Island, WNAC-TV's interest in a Joint Marketing Programming
Agreement with WPRI-TV, the CBS affiliate in Providence, Rhode Island, and
approximately $22 million in cash. The transaction is expected to close by early
in the third quarter and is subject to Department of Justice and Federal
Communications Commission review.
On March 2, 1998, the Company agreed to sell to Robert N. Smith, the
President of Sunrise and Chief Executive Officer and Director of Sunrise and the
Company, the assets and
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<PAGE> 17
certain rights and obligations to be acquired by the Company related to WFFF
from Sinclair Broadcasting Corp. Within ninety days of the closing of the
exchange of WPTZ and WNNE by the Company to Hearst-Argyle Stations, Inc., Smith
had agreed to pay the Company $500,000 which amount would be increased to
reflect any operating losses associated with WFFF subsequent to the Company's
commencement of operation of WFFF under a Time Brokerage Agreement.
ENVIRONMENTAL REGULATION
Prior to the Company's ownership or operation of its facilities,
substances or wastes that are or might be considered hazardous under applicable
environmental laws may have been generated, used, stored or disposed of at
certain of those facilities. In addition, environmental conditions relating to
the soil and groundwater at or under the Company's facilities may be affected by
the proximity of nearby properties that have generated, used, stored or disposed
of hazardous substances. As a result, it is possible that the Company could
become subject to environmental liabilities in the future in connection with
these facilities under applicable environmental laws and regulations. Although
the Company believes that it is in substantial compliance with such
environmental requirements, and has not in the past been required to incur
significant costs in connection therewith, there can be no assurance that the
Company's costs to comply with such requirements will not increase in the
future. The Company presently believes that none of its properties have any
condition that is likely to have a material adverse effect on the Company's
financial condition or results of operations.
ITEM 2. PROPERTIES
Each Station's real properties generally include main offices, studios
and transmitter/antenna sites. The transmitter/antenna sites generally are
located so as to provide maximum signal strength and market coverage.
The Company owns all transmitter/antenna sites and studio and main
office space associated with each of the Stations. The Company generally
considers its facilities to be suitable and of adequate sizes for its current
and intended purposes. The Company does not anticipate any difficulties leasing
or purchasing additional space, if required. The Company owns all of its other
equipment, consisting principally of transmitting antennae, transmitters, studio
equipment and general office equipment. The towers, antennae and other
transmission equipment used by the Stations are generally in good condition,
although opportunities to upgrade facilities are continuously reviewed.
The principal executive offices of the Company are located at 3839 4th
Street North, Suite 420, St. Petersburg, Florida 33703. The telephone number of
the Company at that address is (813) 821-7900. The following table generally
describes the Company's principal properties in each of its markets of
operations:
<TABLE>
<CAPTION>
Approximate
Station and Property Type of Owned Size Expiration
Location Facility and Use or Leased Square Feet) of Lease
- ---------------- ---------------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
WEYI:
Clio, Michigan .............................. Main Office/Studio Owned 18,000 --
Tower/Antenna Site Owned (1) --
Saginaw, Michigan ........................... Satellite Sales Office Leased 1,200 2/14/99
WROC:
Rochester, New York ......................... Main Office/Studio Owned 45,000 --
Brighton, New York .......................... Tower/Antenna Site Owned 2,400 --
</TABLE>
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<PAGE> 18
<TABLE>
<CAPTION>
Station and Property Type of Owned Size Expiration
Location Facility and Use or Leased (Square Feet) of Lease
- -------------------------------------------- ------------------------------ --------- ------------ ----------
<S> <C> <C> <C> <C>
KSBW:
Salinas, California .................................Main Office/Studio Owned 33,000 --
Santa Clara County,
California .......................................Tower/Antenna Site Owned 2,400 --
Monterey County, California..........................Back-up
Antenna/Microwave Site Owned 1,900 --
Gilroy, California ..................................Satellite News and Sales Office Leased 720 (2)
Santa Cruz, California ..............................Satellite News and Sales Office Leased 720 6/30/98
Monterey, California ................................Satellite News and Sales Office Leased 433 7/14/00
WTOV:
Steubenville, Township, Ohio ........................Main Office/Studio Owned 12,750 --
Tower/Antenna Site Owned (1) -
Pultney Township, Ohio ..............................Microwave /Relay Owned 450 --
Wheeling, West Virginia .............................Satellite Sales Office Leased 973 8/31/98
WJAC:
Johnstown, Pennsylvania .............................Main Office/Studio Owned 40,000 --
Laurel Hill, Pennsylvania ...........................Tower/Antenna Site Owned 3,600 --
Altoona, Pennsylvania ...............................Satellite News and Sales Office Leased 1,100 6/30/02
</TABLE>
(1) Main office/studio and tower/antenna site are at the same location.
(2) Month to month
ITEM 3. LEGAL PROCEEDINGS
Lawsuits and claims are filed against the Company from time to time in
the ordinary course of business. Management believes that the outcome of such
matters will not have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not applicable
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Company's common
stock, par value $0.01 per share (the "Common Stock"). All of the Company's
Common Stock is held by Sunrise. The Company has never paid a cash dividend with
respect to its Common Stock.
On February 28, 1997, the Company issued 1,000 shares of its Common
Stock to Sunrise in a private transaction for a cash purchase price of
$50,000,000 in reliance on the exemption, set forth in Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act"), from the registration
requirement set forth in Section 5 of the Securities Act.
On February 28, 1997, the Company sold 300,000 shares of its 14%
Redeemable Preferred Stock (the "Redeemable Preferred Stock") in a private
placement in reliance on Section 4(2) of the Securities Act for a cash purchase
price of $28.95 million, with an aggregate liquidation preference of $30.0
million, or $100 per share, in connection with the acquisition of the
Jupiter/Smith Stations. These shares are entitled to quarterly dividends and
accrue at a rate per annum of 14%. Prior to February 28, 2002, dividends may be
paid in either additional whole shares of Redeemable Preferred Stock or cash, at
the Company's option, and only in cash following that date.
On March 25, 1997, the Company sold $100,000,000 aggregate principal
amount of its 11% Senior Subordinated Notes due 2007 (the "Notes") in reliance
on Rule 144A of the Securities Act to Chase Securities, Inc., NationsBanc
Capital Markets, Inc. and Schroder Wertheim & Co., as the initial purchasers.
The Company paid discounts to the initial purchasers of 3% of the aggregate
principal amount of the Notes sold. See "Management Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
The Company's revolving credit facility (the "Credit Agreement") and
the Notes generally prohibit the Company from paying dividends on its common
stock. See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations - Liquidity and Capital Resources."
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth the selected historical information of
the Company as of the dates and for the periods indicated. Information for the
Company for the ten months ended December 31, 1997 was derived from the
financial statements of the Company, which have been audited by Arthur Andersen,
LLP and included in Item 8. Predecessor historical information for the two
months ended February 28, 1997, were derived from the audited financial
statements of the Jupiter/Smith Stations which have been audited by Arthur
Andersen, LLP and included in Item 8. The predecessor historical financial
information for the three years ended December 31, 1996, has been derived from
the audited financials of the Jupiter/Smith Stations, which were audited by
Arthur Andersen, LLP. The financial information for the year ended December 31,
1993 has been derived from unaudited financial data of the Jupiter/Smith
Stations. Statement of Operations Data below station operating income, as well
as Balance Sheet Data, for the Stations for the years ended, or at, December 31,
1993 through December 31, 1995 have not been presented because such information
is not meaningful for the following reasons: (i) during such period the Stations
were owned and/or operated by persons other than the Company and/or management;
(ii) they were not owned or operated as a single unit for any
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<PAGE> 20
such periods; and (iii) they were operated as part of larger units and
therefore, allocations of corporate expenses, interest and long term debt cannot
be made to the Stations.
<TABLE>
<CAPTION>
COMBINED OPERATIONS | HISTORICAL
PREDECESSOR(1) | STC
| Broadcasting,
| Inc.
Two Months | 10 Months
Years Ended December 31, Ended | Ended
February 28, | December 31,
1993 1994 1995 1996 1997 | 1997
--------- -------- --------- --------- --------- | ------------
<S> <C> <C> <C> <C> <C> | <C>
(Dollars in thousands) |
Statement of Operations Data: |
|
Net revenues $ 28,120 $ 31,043 $ 32,905 $ 37,860 $ 5,228 | $ 36,231
Station operating expenses 17,616 19,822 20,729 18,918 3,166 | 17,927
Amortization of program rights 3,599 3,123 3,181 3,617 620 | 3,214
Depreciation 3,237 3,079 3,121 4,376 757 | 3,475
Amortization 330 616 998 5,889 977 | 9,159
--------- -------- --------- --------- --------- | ---------
Station Operating income $ 3,338 $ 4,403 $ 4,876 5,060 (292) | $ 2,456
========= ======== ========= |
Corporate expense 840 146 | 1,402
--------- --------- | ---------
Operating income 4,220 (438) | 1,054
Interest expense (6,072) (963) | (9,502)
Other income (2) 1,552 39 | 330
--------- --------- | ---------
Loss before income tax benefit (300) (1,362) | (8,118)
Income tax benefit - -- | 299
--------- --------- | ---------
|
Net Loss (300) (1,362) | (7,819)
Dividends and accretion on |
Redeemable Preferred Stock (3) - -- | (3,763)
--------- --------- | ---------
Net loss applicable to |
Common Stock $ (300) $ (1,362) | $ (11,582)
========= ========= | =========
Other Financial Data: |
|
Net cash provided by (used in): |
Operating activities $ 7,215 $ 6,898 $ 9,557 $ 1,632 | $ 5,106
Investing activities (1,287) (750) (108,298) (233) | $(201,986)
Financing activities (5,680) (5,978) 101,405 -- | 198,512
Broadcast cash flow (4) 7,822 8,624 15,316 1,441 | 14,990
Broadcast cash flow margins (5) 25.20% 26.21% 40.45% 27.60% | 41.37%
Capital expenditures $ 1,287 $ 750 $ 2,966 $ 264 | $ 2,848
Payments for program rights 3,399 3,552 3,626 621 | 3,314
Ratio of earnings to fixed charges (6) | (11,882)
|
Balance Sheet Data: |
|
Cash and cash equivalents | 1,632
Total assets | 243,244
Long term debt: |
Credit Agreement | 14,500
Senior Subordinate Debt | 100,000
Redeemable Preferred Stock | 32,263
Stockholder's equity | 52,429
</TABLE>
20
<PAGE> 21
Notes to Selected Historical Financial Data
(1) Financial statements for periods presented are at the predecessor cost
basis.
(2) Other income consists primarily of approximately $1.5 million of non
recurring revenues for consulting services provided during 1996.
(3) Reflects dividend requirement and accretion on the Redeemable Preferred
Stock for the ten month period ended December 31, 1997.
(4) "Broadcast cash flow" consists of station operating income (loss) plus
depreciation of property and equipment, amortization of intangible
assets and amortization of program rights minus payments on program
rights. Broadcast cash flow is not a measure of performance calculated
in accordance with GAAP and should not be considered in isolation or as
a substitute for net income (loss), cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with GAAP or as a measure of liquidity or profitability.,
(5) "Broadcast cash flow margin" is broadcast cash flow divided by net
revenues expressed as a percentage.
(6) For purposes of this calculation, "earnings" consist of loss before tax
benefit and fixed charges. "Fixed charges" consist of interest expense,
amortization of deferred financing costs, the component of rental
expense believed by management to be representative of the interest
factor thereon and preferred stock dividend requirements and related
accretion. If the ratio is less than 1.0x, the deficiency is shown.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The operating revenues of the Stations are derived primarily from
advertising revenues and, to a much lesser extent, compensation paid by the
networks to the Stations for broadcast network programming. The Stations'
primary operating expenses are employee compensation and related benefits, news
gathering, film and syndicated programming expenditures and promotional costs. A
significant proportion of the operating expenses of the Stations are fixed.
In general, television stations receive revenues from advertising sold
for placement within and adjoining its local programming and national network
programming. Advertising is sold in time increments and is priced primarily on
the basis of a program's popularity within the demographic group an advertiser
desires to reach, as measured principally by audience surveys conducted in
February, May and November of each year. The ratings of local television
stations affiliated with a national television network can be affected by
ratings of network programming. In addition, advertising rates are affected by
the number of advertisers competing for the available time, the size and
demographic makeup of the markets served by the television station and the
availability of
21
<PAGE> 22
alternative advertising media in the market areas. Advertising rates are highest
during the most desirable viewing hours, generally during local news
programming, access (the hour before prime time), early fringe (3:00 p.m. to
5:00 p.m.) and prime time.
Most advertising contracts are short-term and generally run for only a
few weeks. A majority of the revenues of the Stations is generated from local
advertising, which is sold primarily by a Station's sales staff, and the
remainder of the advertising revenues represents national advertising, which is
sold by independent national advertising sales representatives. The Stations
generally pay commissions to advertising agencies on local and national
advertising, and on national advertising the Stations also pay additional
commissions to the national sales representatives. Three Stations are
represented by Katz Media Corporation, one Station is represented by TeleRep,
Inc. and one Station by Harrington, Righter and Parsons, each an independent
national advertising sales representative firm operating under an agreement that
provides for exclusive representation within the particular market of the
Station. In 1997, local advertising comprised 55.8% of the Company's gross spot
revenues (excluding political advertising), and national advertising comprised
44.2% of the Company's gross spot revenues (excluding political advertising).
The gross spot broadcast revenues of the Stations are generally highest in the
second and fourth quarters of each year, due in part to including increases in
consumer advertising in the spring and retail advertising in the period leading
up to and including the holiday season. On a quarterly basis for 1997, first,
second, third and fourth quarter gross spot revenues constituted 21.5%, 26.6%,
23.4% and 28.5%, respectively excluding political revenues. Advertising spending
by political candidates is typically heaviest during the fourth quarter. In
1996, the Stations' advertising revenues benefited from presidential and
congressional elections as well as the NBC broadcast of both the United
States-based Olympic Games and the Super Bowl.
"Broadcast Cash Flow" is defined as station operating income (loss)
plus depreciation of property and equipment, amortization of intangible assets
and amortization of program rights, less payments for program rights. The
Company has included broadcast cash flow data because such data are commonly
used as a measure of performance for broadcast companies and are used by
investors to measure a company's ability to service debt. Broadcast cash flow is
not, and should not be used as an indicator or alternative to operating income,
net loss or cash flow as reflected in the accompanying financial statements, is
not intended to represent funds available for debt service, dividends,
reinvestment or other discretionary uses, is not a measure of financial
performance under generally accepted accounting principles and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with generally accepted accounting principles.
This Annual Report on Form 10-K contains forward-looking statements
that involve a number of risks and uncertainties. When used in this Annual
Report on Form 10-K the words "believes," "anticipated," and similar expressions
are intended to identify forward-looking statements. There are a number of
factors that could cause the Company's actual results to differ materially from
those forecasted or projected in such forward-looking statements. These factors
include, without limitation, competition from other local free over-the-air
broadcast stations, acquisition of additional broadcast properties and future
debt service obligations. Readers are cautioned not to place undue reliance on
these forward-looking statements which speak only as of the date hereof. The
Company undertakes no obligations to publicly release the result of any
revisions to these forward-looking statements which may be made to reflect
events or circumstance after the date hereof or to reflect the occurrence of
unanticipated events.
22
<PAGE> 23
The 1997 financial information is a combination of the Company financial
statements of the ten months ended December 31, 1997 and the Jupiter/Smith
Stations financial statements for the two months ended February 28, 1997.
The following table sets forth certain data for the three years ended December
31, 1997.
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1996 1997
-------- -------- -------
<S> <C> <C> <C>
(Dollars in thousands)
Station Operating Income $ 4,876 $ 5,060 $ 2,164
Add:
Amortization of program rights 3,181 3,617 3,833
Depreciation of property and equipment 3,121 4,376 4,232
Amortization of intangibles 998 5,889 10,136
Less:
Payments for program rights (3,552) (3,626) (3,935)
-------- --------- ---------
Broadcast cash flow $ 8,624 $ 15,316 $ 16,430
======== ========= =========
</TABLE>
Television Revenues
Set forth below are the principal types of television revenues that the
Company has generated for the periods indicated and the percentage
contribution of each to total revenues.
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1996 1997
---------------- -------------------- -----------------
$ % $ % $ %
------ -------- ------ -------- ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Local (1) $18,991 49.5% $20,334 45.7% $23,768 48.9%
National 14,808 38.6 16,174 36.3 18,847 38.8
Political 201 0.5 3,513 7.9 300 0.7
Network Compensation 2,545 6.6 2,781 6.2 3,078 6.3
Trade and barter (2) 1,225 3.2 969 2.2 1,731 3.6
Other 587 1.6 749 1.7 839 1.7
------- -------- ------- -------- ------- --------
Total 38,357 100.0% 44,520 100.0% 48,563 100.0%
Agency and national
representative commissions (3) 5,452 14.2 6,660 15.0 7,105 14.6
------- -------- ------- -------- ------- --------
Net revenue $32,905 85.8% $37,860 85.0% $41,458 85.4%
======= ======== ======= ======== ======= ========
</TABLE>
(1) National sales of approximately $1.0 million for 1995 have been
reclassified as local to maintain consistency with a reclassification of certain
national sales in 1996 and 1997.
(2) Represents value of commercial time exchanged for syndicated programs
and commercial time exchanged for goods and services (trade outs).
(3) Represents commissions paid to local and national advertising agencies
and to national sales representatives.
RESULTS OF OPERATIONS
Set forth below is a summary of the operations of the Company for the
years indicated and their percentages of net revenues.
23
<PAGE> 24
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1996 1997
------------------------ ------------------------ -----------------
$ % of $ % of $ % of
Revenues Revenues Revenues
-------- --------- --------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Net Revenues: $32,905 100.0% $37,860 100.0% $41,458 100.0%
Engineering expense 2,073 6.3 1,785 4.7 1,784 4.3
Program/Production expense 2,750 8.4 2,735 7.2 2,891 7.0
News expense 5,215 15.8 4,637 12.2 5,109 12.3
Sales/Traffic expense 4,136 12.6 3,371 8.9 3,836 9.3
Promotion expense 559 1.7 381 1.1 557 1.3
General & administrative expense 4,975 15.1 4,950 13.1 5,345 12.9
Trade and barter expense 1,021 3.1 1,059 2.8 1,571 3.8
------- ------ ------- ------ ------- ------
Total station operating
expenses 20,729 63.0 18,918 50.0 21,093 50.9
------- ------ ------- ------ ------- ------
Amortization of program rights 3,181 9.7 3,617 9.6 3,833 9.2
Depreciation 3,121 9.5 4,376 11.5 4,232 10.2
Amortization 998 3.0 5,889 15.5 10,136 24.5
------- ------ ------- ------ ------- ------
Station operating income $ 4,876 14.8% $ 5,060 13.4% $ 2,164 5.2%
======= ====== ======= ====== ======= ======
Broadcast cash flow $ 8,624 26.2% $15,316 40.4% $16,430 39.6%
======= ====== ======= ====== ======= ======
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Gross Revenues.
Gross Revenues increased by $4.1 million, or 9.2% to $48.6 million for
the year ended December 31, 1997 from $44.5 million for the year ended December
31, 1996. Gross local revenues in 1997 increased by approximately $3.4 million
or 16.9%, as compared to 1996, while gross national revenues increased by
approximately $2.7 million or 16.5%, as compared to 1996. The year ended
December 31, 1997 includes $3.1 million of gross revenues for WJAC, since the
date of acquisition. The majority of the other increase in local and national
revenues were generated by KSBW, WEYI and WROC and resulted from sales
initiatives started in 1996. Both local and national revenues in 1996 were
favorably impacted by the United States-based Olympic Games. Political revenues
in 1997 were $.3 million compared to $3.5 million in 1996, due to 1997 being an
off year for presidential and congressional races. Trade and barter revenues
increased $0.8 million due to changes in value of film barter (see increase in
trade and barter expense) and the use of trade to purchase capital items.
Net Revenues.
Net revenues increased by $3.6 million, or 9.5% to $41.5 million for
the year ended December 31, 1997 from $37.9 million for the year ended December
31, 1996. Agency and national representative commissions as a percentage of
sales decreased due to reduced political sales.
Station Operating Expenses.
Station operating expenses increased by $2.2 million to $21.1 million
or 11.6% for the year ended December 31, 1997 from $18.9 million for the year
ended December 31, 1996. The year ended December 31, 1997 includes $1.2 million
of station operating expenses for WJAC since the date of acquisition. A majority
of the other expense increase related to higher costs assigned to barter film
contracts, increased sales expense due to full staff at WROC, increased
commissions on increased local sales, increased costs
24
<PAGE> 25
at WEYI for improvements in news personnel and news services and additional news
expenditures at WROC.
Amortization of Program Rights.
Amortization of program rights increased by $0.2 million or 5.6% to
$3.8 million for the year ended December 31, 1997 from $3.6 million for the year
ended December 31, 1996 due to small yearly increases in continuing programs and
the addition of The Rosie O'Donnell Show at KSBW and WTOV and $0.15 million of
amortization for WJAC since date of acquisition.
Depreciation
Depreciation decreased by $0.2 million or 4.5% to $4.2 million for the
year ended December 31, 1997 from $4.4 million for the year ended December 31,
1996 due to the revaluation of assets at the time of the purchase by the Company
of the Jupiter/Smith Stations and the acquisition of WJAC in October 1997.
Amortization.
Amortization increased by $4.2 million or 73.8% to $10.1 million for
the year ended December 31, 1997 from $5.9 million for the year ended December
31, 1996 due to the upward evaluation of intangible assets related to the
Company's acquisition of the five stations during the year.
Station Operating Income.
Station operating income decreased by $2.9 million or 56.9% to $2.2
million for the year ended December 31, 1997 from $5.1 million for the year
ended December 31, 1996 due to the reasons outlined above.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Gross Revenues
Gross revenues increased by $6.1 million or 15.9% to $44.5 million for
the year ended December 31, 1996 from $38.4 million for the year ended December
31, 1995. Local revenues in 1996 increased by approximately $1.3 million, or
7.1% as compared to 1995, while national revenues in 1996 increased by
approximately $1.4 million, or 9.2% as compared to 1995. Local and national
revenues were favorably affected by political elections, strong economic
activity in the Stations' markets and the NBC broadcast of both the Super Bowl
and the United States-based Olympic Games. Political revenues in 1996 were $3.5
million compared to $0.2 million in 1995 due to the presidential and
congressional races and many local contests.
Net Revenues.
Net revenues increased by $5.0 million, or 15.2% to $37.9 million for
the year ended December 31, 1996 from $32.9 million for the year ended December
31, 1995. Agency and national representative commissions as a percentage of
sales increased due to higher political sales.
Station Operating Expenses.
Station operating expenses decreased by $1.8 million or 8.7% to $18.9
million for the year ended December 31, 1996 from $20.7 million for the year
ended December 31, 1995.
25
<PAGE> 26
A majority of the decreases in expense were the results of reduced personnel,
especially in news and operations, reduced outside news services, lower
maintenance costs on newer equipment, sales compensation plan changes, unfilled
sales and marketing positions and elimination of unnecessary sales promotion
programs.
Amortization of Program Rights.
Amortization of syndicated program rights increased by $0.4 million, or
12.5% to $3.6 million for the year ended December 31, 1996 from $3.2 million for
the year ended December 31, 1995 due to the increased cost of continuing
programs and the replacement of certain programs at WEYI (beginning in September
1996) with more expensive high-quality programming intended to generate higher
ratings in early fringe and access.
Depreciation.
Depreciation increased by $1.3 million or 34.1%, to $4.4 million for
the year ended December 31, 1996 from $3.1 million for the year ended December
31, 1995 due to the revaluation of assets in January 1996 at the time of the
purchase by Jupiter/Smith of four of the Stations.
Amortization.
Amortization increased by $4.9 million to $5.9 million for the year
ended December 31, 1996 from $1.0 million for the year ended December 31, 1995
due to the revaluation of assets in January 1996 at the time of the purchase by
Jupiter/Smith of four of the stations.
Station Operating Income.
Station operating income increased by $0.2 million, or 3.5%, to $5.1
million for the year ended December 31, 1996 from $4.9 million for the year
ended December 31, 1995 due to the reasons outlined above.
LIQUIDITY AND CAPITAL RESOURCES
On March 25, 1997, the Company completed a private placement of
$100,000,000 principal amount of its 11% Senior Subordinated Notes (the "Old
Notes") due March 15, 2007. The proceeds from the sale of the Old Notes were
used to repay all outstanding term loan and revolving credit borrowings under
the Company's existing bank credit agreement (the "Credit Agreement"). The
remaining net proceeds from the sale of the Old Notes were used to fund the
purchase of WJAC and for general working capital purposes. Interest is payable
on March 15 and September 15 of each year. On September 26, 1997, the Company
completed an exchange offer in which all of the Old Notes were exchanged for
registered 11% Senior Subordinated Notes (the "New Notes") of the Company having
substantially identical terms as the Old Notes. The indenture imposes certain
limitations on the ability of the Company and certain of its subsidiaries to,
among other things, pay dividends or make certain other restricted payments,
consummate certain asset sales, enter into certain transactions with affiliates,
incur liens, impose restrictions on the ability of a subsidiary to pay dividends
or make certain payments to the Company, merge or consolidate with any person or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company.
The Company's Credit Agreement currently provides for borrowings up to
$35.0 million under
26
<PAGE> 27
the secured revolving credit facility, which matures on February 27, 2004, with
reducing availability beginning in January 2000. Undrawn amounts under such
facility are available for acquisitions, working capital and general corporate
purposes. There was a $14.5 million outstanding balance under the Credit
Agreement at December 31, 1997.
Interest payments under the Credit Agreement and the New Notes
represent significant liquidity requirements for the Company. Loans under the
Credit Agreement bear interest at floating rates based upon the interest rate
option selected by the Company. In addition, the Company's Reedemable Preferred
Stock is cumulative, with dividends payable quarterly, and prior to 2002 may, at
the option of the Company, be paid in additional shares of Redeemable Preferred
Stock. In the event dividends on the Redeemable Preferred Stock are paid in
cash, dividends would amount to $4.2 million annually. The Credit Agreement and
the Indenture will limit the Company's ability to pay cash dividends prior to
2002 and the Company's ability to exchange the Redeemable Preferred Stock for
debt of the Company.
Based on the current level of operations and anticipated future
internally generated growth the Company anticipates that its cash flow from
operations, together with borrowings under the Credit Agreement and additional
equity contributions from Sunrise should be sufficient to meet its anticipated
requirements for working capital, capital expenditures and interest payments and
the acquisition of ARTC. The Company's future operating performance and ability
to service or refinance the Notes and to extend or refinance the Credit
Agreement will be subject to future economic conditions and to financial,
business and other factors, many of which are beyond the control of the Company.
The ability of the Company to implement its business strategy, complete its
transaction with Hearst-Argyle and to consummate future acquisitions will
require significant additional debt and/or equity capital and no assurance can
be given as to whether, and on what terms, such additional debt and/or equity
capital will be available, including additional equity contributions from
Sunrise. The degree to which the Company is leveraged could have a significant
effect on its results of operations.
The Company regularly enters into program contracts for the right to
broadcast television programs produced by others and program commitments for the
right to broadcast programs in the future. Such programming commitments are
generally made to replace expiring or canceled program rights. Payments under
such contracts are made in cash or the concession of advertising spots to the
program provider to resell, or a combination of both.
CAPITAL EXPENDITURES
Capital expenditures were $3.1 and $3.0 million for the years ended
December 31, 1997 and 1996, respectively. Capital expenditures in 1997 were used
to improve the news gathering and production capabilities of WROC, WEYI and
WJAC. The Company's ability to make capital expenditures is subject to certain
restrictions under the Credit Agreement. The Company anticipates that capital
expenditures for the five stations in 1998 will amount to $2.5 million.
DEPRECIATION, AMORTIZATION AND INTEREST
Because the Company has incurred substantial indebtedness in the
acquisitions of its five Stations, ("Acquisitions") for which it will have
significant debt service requirements, and because the Company will have
significant non-cash charges relating to the depreciation and amortization
expense of the property and equipment and intangibles that were acquired in the
Acquisitions, the Company expects that it will report net losses for the
foreseeable future.
The Acquisitions are accounted for using the purchase method of
accounting, and the total purchase price has been allocated to the assets and
liabilities acquired based upon their respective fair values. As a result, the
Company records depreciation and amortization expenses, as well as
27
<PAGE> 28
interest expenses, that are significantly in excess of historical levels for the
Stations.
INFLATION
The Company believes that its business is affected by inflation to an extent no
greater than other businesses are generally affected.
RECENT DEVELOPMENTS
On July 8, 1997, the Company entered into a purchase agreement ("ARTC
Purchase Agreement") with Abilene Radio and Television Company ("ARTC") to
acquire all of its outstanding common stock. ARTC owns KRBC-TV, channel 9, the
NBC affiliate for Abilene, Texas, and KACB-TV, channel 3, the NBC affiliate for
San Angelo, Texas. On December 30, 1997, the Company and ARTC entered into an
amendment to the ARTC Purchase Agreement that adjusted the purchase price to
$7,250,000 plus working capital. The transaction is expected to close on March
31, 1998. The ARTC Purchase Agreement is subject to customary conditions and no
assurances can be given as to whether, or on what terms, such transaction will
be consummated by the Company.
Unless applicable waiver standards are met, the FCC has a duopoly rule
which generally prohibits a single individual or entity from having an
attributable interest in two or more television stations with overlapping Grade
B service areas. The FCC has pending a rulemaking proceeding in which it has
proposed to modify the television duopoly rule to permit the common ownership of
television stations in different DMAs, so long as the Grade A service contours
of the stations do not overlap. On February 12,1998, the FCC conditioned the
transfer grant of the ARTC stations to the Company on the outcome of its
rulemaking proceedings. If the final ruling is adverse to the Company, the
Company would be required to sell one of the two stations to an unrelated party.
There can be no assurance as to the terms of such sales or that such sale would
not have a material adverse effect on the Company's business, financial
condition and results of operations.
In a series of transactions, the Company will acquire certain assets
from Hearst-Argyle Television, Inc., ("Hearst") through transactions structured
as a Section 1031 tax deferred exchange of assets. On February 3, 1998, the
Company agreed to acquire WPTZ-TV ("WPTZ"), WNNE-TV ("WNNE"), and a LMA for
WFFF-TV ("WFFF") from Sinclair Broadcast Group, Inc. for $72.0 million, with the
intention of using these assets in the Hearst transaction. WPTZ and WNNE are the
NBC affiliates and WFFF is the Fox affiliate serving the Burlington, Vermont and
Plattsburgh, New York television market. On February 18, 1998, the Company
agreed with Hearst-Argyle Television, Inc. to trade KSBW-TV, WPTZ, and WNNE for
WDTN-TV, the ABC affiliate in Dayton, Ohio, WNAC-TV, the Fox affiliate in
Providence, Rhode Island, WNAC-TV's interest in a Joint Marketing Programming
Agreement with WPRI-TV, the CBS affiliate in Providence, Rhode Island, and
approximately $22 million in cash. The transaction is expected to close by early
in the third quarter and is subject to Department of Justice and Federal
Communications Commission review.
On March 2, 1998, the Company agreed to sell to Robert N. Smith, the
President of Sunrise and Chief Executive Officer and Director of Sunrise and the
Company, the assets and certain rights and obligations to be acquired by the
Company related to WFFF from Sinclair Broadcasting Corp. Within ninety days of
the closing of the exchange of WPTZ and WNNE by the Company to Hearst-Argyle
Stations, Inc., Smith has agreed to pay the Company $500,000, which amount would
be increased to reflect any operating losses associated with WFFF subsequent to
the Company's commencement of operation of WFFF under a Time Brokerage
Agreement.
YEAR 2000 COMPLIANCE
The Company has commenced a study of its computer systems in order to
assess its exposure to year 2000 issues. The Company expects to make the
necessary modifications or changes to its computer information systems to enable
proper processing of transactions relating to
28
<PAGE> 29
the year 2000 and beyond. There can be no assurance that costs and expenses or
other matters relating to year 2000 issues will not have a material adverse
effect on the Company.
ENVIRONMENTAL REGULATION
Prior to the Company's ownership or operation of its facilities,
substances or wastes that are or might be considered hazardous under applicable
environmental laws may have been generated, used, stored or disposed of at
certain of those facilities. In addition, environmental conditions relating to
the soil and groundwater at or under the Company's facilities may be affected by
the proximity of nearby properties that have generated, used, stored or disposed
of hazardous substances. As a result, it is possible that the Company could
become subject to environmental liabilities in the future in connection with
these facilities under applicable environmental laws and regulations. Although
the Company believes that it is in substantial compliance with such
environmental requirements, and has not in the past been required to incur
significant costs in connection therewith, there can be no assurance that the
Company's costs to comply with such requirements will not increase in the
future. The Company presently believes that none of its properties have any
condition that is likely to have a material adverse effect on the Company's
financial condition or results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
29
<PAGE> 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholder of STC Broadcasting, Inc.:
We have audited the accompanying consolidated balance sheets of STC Broadcasting
Inc. and Subsidiaries as of December 31, 1997, and March 1, 1997, and the
related consolidated statements of operations, stockholder's equity and cash
flows for the ten months ended December 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of STC Broadcasting
Inc. and Subsidiaries as of December 31, 1997, and March 1, 1997, and the
results of their operations and their cash flows for the ten months ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida
February 18, 1998 (except with respect to the
matters discussed in Note 13, as to which
the date is March 2, 1998)
30
<PAGE> 31
STC BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997, AND MARCH 1,1997
<TABLE>
<CAPTION>
December 31, 1997 March 1, 1997
----------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,632,190 $ 879,455
Accounts receivable, net of allowance for
doubtful accounts of approximately $286,000
and $297,000, respectively 10,924,654 6,967,985
Current portion of program rights 4,175,969 3,623,712
Other current assets 929,240 508,812
-------------- ---------------
Total current assets 17,662,053 11,979,964
-------------- ---------------
PROPERTY AND EQUIPMENT, net 36,002,597 26,920,478
INTANGIBLE ASSETS, net 171,289,284 130,464,952
OTHER LONG TERM ASSETS, net 18,290,279 11,280,848
-------------- ---------------
Total assets $ 243,244,213 $ 180,646,242
============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,407,165 $ 755,940
Accrued interest 3,273,520 --
Accrued compensation 805,897 76,210
Accrued professional 179,642 --
Accrued other 498,614 376,610
Current portion of long-term debt -- 90,800,000
Current portion of program rights payable 4,258,003 3,623,441
-------------- ---------------
Total current liabilities 11,422,841 95,632,201
LONG-TERM DEBT, net of current portion 114,500,000 --
DEFERRED INCOME TAXES 23,562,000 --
PROGRAM RIGHTS PAYABLE, net of current portion 8,950,776 7,502,059
OTHER LONG-TERM LIABILITIES 116,041 --
REDEEMABLE PREFERRED STOCK, liquidation 32,263,225 28,500,000
preference of $30,000,000
STOCKHOLDER'S EQUITY:
Common stock, par value $.01 per share, 1,000 shares authorized,
issued and outstanding 10 10
Additional paid-in capital 64,011,972 49,011,972
Accumulated deficit (11,582,652) --
-------------- ---------------
Total stockholder's equity 52,429,330 49,011,982
-------------- ---------------
Total liabilities and stockholder's equity $ 243,244,213 $ 180,646,242
============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 32
STC BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TEN MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
REVENUES:
Broadcasting spot revenues, net of agency and national
representative commissions of $6,244,161 $ 31,450,425
Network compensation 2,611,714
Trade and barter 1,518,120
Other 650,688
-------------
Total revenues 36,230,947
OPERATING EXPENSES:
Station operating 11,539,436
Selling, general and administrative 8,211,908
Trade and barter 1,390,001
Depreciation of property and equipment 3,474,522
Amortization of intangibles and other long term assets 9,159,173
Corporate overhead 1,402,349
--------------
Total operating expenses 35,177,389
--------------
OPERATING INCOME 1,053,558
OTHER INCOME (EXPENSE):
Interest income 289,855
Interest expense (9,502,041)
Other income, net 40,201
--------------
NET LOSS BEFORE INCOME TAX BENEFIT (8,118,427)
INCOME TAX BENEFIT 299,000
--------------
NET LOSS AFTER TAXES (7,819,427)
REDEEMABLE PREFERRED STOCK DIVIDENDS AND ACCRETION (3,763,225)
--------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDER $ (11,582,652)
==============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (11,583)
==============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 1,000
==============
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 33
STC BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE TEN MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Total
Common Additional Accumulated Stockholder's
Stock Paid-in Capital Deficit Equity
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning balance $ -- $ -- $ -- $ --
Net loss applicable to common
stockholder -- -- (11,582,652) (11,582,652)
Issuance of common stock,
net of expenses 10 49,011,972 -- 49,011,982
Capital contribution by Sunrise
Television Corp. -- 15,000,000 -- 15,000,000
-------- ------------- ------------- -------------
Balance, December 31, 1997 $ 10 $ 64,011,972 $ (11,582,652) $ 52,429,330
======== ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE> 34
STC BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss after taxes $ (7,819,427)
Adjustments to reconcile net loss after taxes to net
cash provided by operating activities
Depreciation of property and equipment 3,474,522
Amortization of intangibles and other long term assets 9,159,173
Amortization of program rights 3,213,767
Payments on program rights payable (3,313,970)
Deferred tax benefit (299,000)
Income on disposal of property and equipment (46,476)
Change in operating assets and liabilities net of effects from acquired
stations:
Accounts receivable (2,429,745)
Other current assets (660,479)
Accounts payable and accrued expenses 3,827,449
--------------
Net cash provided by operating activities 5,105,814
--------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Jupiter/Smith stations (163,175,576)
Acquisition of WJAC, Incorporated (36,077,537)
Capital expenditures (2,848,235)
Proceeds from the disposal of property and equipment 115,244
--------------
Net cash used in investing activities (201,986,104)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing under credit agreement 107,800,000
Proceeds from senior subordinated notes 100,000,000
Repayment of credit agreement (93,300,000)
Proceeds from sale of preferred stock, net 28,500,000
Proceeds from sale of common stock, net 49,011,982
Capital contribution of cash by parent 15,000,000
Deferred acquisition and debt refinancing
costs incurred (8,499,502)
--------------
Net cash provided by financial activities 198,512,480
--------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,632,190
CASH AND CASH EQUIVALENTS, beginning balance -
--------------
CASH AND CASH EQUIVALENTS, December 31, 1997. $ 1,632,190
==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non cash items
Preferred dividend and accretion $ 3,763,225
Exchange offer on Senior Subordinated Notes $ 100,000,000
New program contracts $ 3,706,879
Interest paid $ 6,228,521
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE> 35
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, AND MARCH 1, 1997
1. ORGANIZATION AND NATURE OF OPERATIONS:
The accompanying financial statements present the consolidated financial
statements of STC Broadcasting, Inc. and subsidiaries (the "Company"). The
Company was incorporated on November 1, 1996, in the state of Delaware and
commenced operations on March 1, 1997, and is a wholly owned subsidiary of
Sunrise Television Corp. ("Sunrise"). All of the common stock of Sunrise is
owned by Sunrise Television Partners, L.P., of which the managing general
partner is Thomas O. Hicks, an affiliate of Hicks, Muse, Tate and Furst,
Incorporated ("Hicks Muse"). The Company operates the following five commercial
television stations (the "Stations"):
<TABLE>
STATION ACQUISITION DATE DESIGNATED MARKET AREA NETWORK AFFILIATION
------- ---------------- ---------------------- -------------------
<S> <C> <C> <C>
WEYI-TV March 1, 1997 Flint, Saginaw-Bay City, NBC
Michigan
WROC-TV March 1, 1997 Rochester, New York CBS
KSBW-TV March 1, 1997 Salinas-Monterey, NBC
California
WTOV-TV March 1, 1997 Wheeling, West Virginia NBC
and Steubenville, Ohio
WJAC-TV October 1, 1997 Johnstown, Altoona, State NBC
College, Pennsylvania
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying consolidated financial statements include the
consolidated accounts of the Company. All material intercompany items and
transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
Concentration of Risk and Accounts Receivable
The Company serves the markets shown in Note 1 above. Accordingly, the
revenue potential of the Company is dependent on the economy in these markets.
The Company monitors their accounts receivable through continuing credit
evaluations. Historically, the Stations have not had significant uncollectible
accounts. Provision for losses on doubtful accounts amounts to approximately
$49,000 for the ten months ended December 31, 1997. The Company acquired trade
receivables, net of reserves of approximately $346,000 in allowance for doubtful
accounts, in connection with the acquisition of certain television stations
during 1997. Write offs of doubtful accounts amounts to approximately $109,000
for the ten months ended December 31, 1997.
Program Rights
The Company has agreements with distributors for the rights to
television programming over contract periods which generally run from one to
four years. Each contract is recorded as an asset and liability when the license
agreement is signed. Program rights and the corresponding obligation are
classified as current or long-term based on the estimated usage and payment
terms.
35
<PAGE> 36
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
The capitalized cost of program rights for one-time only programs is
amortized on a straight-line basis over the period of the program rights
agreements. The capitalized cost of program rights for multiple showing
syndicated program material is amortized on an accelerated basis over the period
of the program rights agreements. Program rights are reflected in the
consolidated balance sheet at the lower of unamortized cost or estimated net
realizable value. Estimated net realizable values are based upon management's
expectation of future advertising revenues net of sales commissions to be
generated by the program material. Payments of program rights liabilities are
typically paid on a scheduled basis and are not affected by adjustments for
amortization or estimated net realizable value.
Program Barter Transactions
The Company purchases certain programming, which includes advertising
time of the syndicator during the airing of the programs. The estimated fair
value of advertising revenue received in program barter transactions is
recognized as revenue and a corresponding program cost when the airtime is used
by the advertiser. Program barter revenue and expense of approximately $938,000
is included in trade and barter revenue and expense for the ten month period
ended December 31, 1997.
Trade Transactions
The Company broadcasts certain customers' advertising in exchange for
equipment, merchandise and services. The estimated fair value of the equipment,
merchandise or services received is recorded as deferred trade costs, the
corresponding obligation to broadcast advertising is recorded as deferred trade
revenues, resulting in a net current asset or net current liability. The
deferred trade costs are expensed or capitalized as they are used, consumed or
received. Deferred trade revenues are recognized as the related advertising is
aired. Total trade revenue amounts to approximately $580,000 for the ten months
ended December 31, 1997.
Property and Equipment
Property and equipment of the Stations acquired were recorded at the
estimate of fair value based upon independent appraisals and property and
equipment acquired subsequent thereto is recorded at cost. Property and
equipment is depreciated using the straight-line method over the estimated
useful lives of the assets, as follows:
Buildings 20-39 years
Broadcast equipment 5-15 years
Vehicles 3 years
Furniture and computers 5 years
Expenditures for maintenance and repairs are charged to operations as
incurred, whereas expenditures for renewals and betterments are capitalized.
Intangible Assets
Intangible assets consist principally of values assigned to the Federal
Communications Commission (FCC) licenses and network affiliation agreements of
the Stations. Intangible assets are being amortized on the straight-line basis
over 15 years.
36
<PAGE> 37
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
Intangible assets consist of the following:
<TABLE>
<CAPTION>
December 31, 1997 March 1, 1997
----------------- -------------
<S> <C> <C>
FCC licenses $ 60,589,342 $ 30,858,162
Network affiliations 116,306,416 97,717,514
Other 2,454,956 1,889,276
-------------- -------------
179,350,714 130,464,952
Less: Accumulated amortization (8,061,430) --
-------------- -------------
$ 171,289,284 $ 130,464,952
============== =============
</TABLE>
Other Long Term Assets
Other assets consist principally of values assigned to deferred
financing and acquisition costs and the non-current portion of program rights.
Deferred financing costs are amortized over the applicable loan period (seven or
ten years) on a straight-line basis, and deferred acquisition and organization
costs are amortized over a five year period on a straight-line basis.
Other assets consist of the following:
<TABLE>
<CAPTION>
December 31, 1997 March 1, 1997
----------------- -------------
<S> <C> <C>
Deferred financing and acquisition costs, net
of accumulated amortization of $1,097,743 $ 9,590,604 $ 4,164,490
Program rights, net of current portion 8,597,548 7,116,358
Other 102,127 --
------------ ------------
$ 18,290,279 $ 11,280,848
============= ============
</TABLE>
Revenue Recognition
The Company's primary source of revenue is the sale of television time
to advertisers. Revenue is recorded when the advertisements are broadcast and
are net of agency and national representative commissions.
Income Taxes
Income taxes are provided using the liability method in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes."
Long-Lived Assets
Long-lived assets and identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount should be addressed. The Company has determined that there has
been no impairment in the carrying value of long-lived assets of the Stations
as of December 31, 1997.
Fair Value of Financial Instruments
The book value of all financial instruments approximates their fair
value as of December 31, 1997 and March 1, 1997.
37
<PAGE> 38
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates.
Basic and Diluted Net Loss per Common Share
Net loss per common share is computed as net loss applicable to common
stockholder divided by the weighted average number of shares of common stock
outstanding.
Current Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings per Share" (SFAS 128) which establishes new
standards for computing and presenting earnings per share (EPS). Specifically,
SFAS 128 replaces the presentation of primary EPS with a presentation of basic
EPS, requires dual presentation of basic and diluted EPS on the face of the
income statement and requires a reconciliation of the basic EPS computation to
the diluted EPS computation. For all periods presented, the Company had no
outstanding potential dilutive or anti-dilutive common shares.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" (SFAS 130), which establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS 131), which establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to stockholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. Management has not yet evaluated the effects of this change on the
Company's financial statements but believes that in SFAS 131's current form, it
may require competitive disclosure that may be detrimental to its future
operations.
In February 1998, FASB released SFAS No. 132, "Employers' Disclosures
about Pensions and other Postretirement Benefits" (SFAS 132). SFAS 132 revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans.
SFAS 130, SFAS 131 and SFAS 132 are effective for financial statements
for periods beginning after December 15, 1997. The Company does not believe that
the future effects of SFAS 130 and 132 will be significant to its consolidated
financial statements.
38
<PAGE> 39
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
3. ACQUISITIONS:
On March 1, 1997, the Company acquired substantially all of the assets
of WEYI-TV, WROC-TV, KSBW-TV and WTOV-TV (the "Jupiter / Smith Stations") from
Jupiter / Smith TV Holdings, L.P. and Smith Broadcasting Partners, L.P. for
approximately $163,176,000. The accompanying consolidated financial statements
reflect the acquisition under the purchase method of accounting. Accordingly,
the acquired assets and assumed liabilities were recorded at fair value as of
the date of acquisition. The acquisition price was allocated as follows:
<TABLE>
<S> <C>
Property and equipment $ 26,921,000
Intangible assets and deferred costs 130,530,000
Working capital 5,725,000
-------------
$ 163,176,000
=============
</TABLE>
The acquisition was funded by approximately $90,800,000 in borrowings
under the Credit Agreement and the sale of preferred and common stock in the
approximate amount of $77,500,000.
On October 1, 1997 the Company acquired 100% of the outstanding stock
of WJAC, Incorporated ("WJAC") for approximately $36,078,000. The accompanying
consolidated financial statements reflect the acquisition under the purchase
method of accounting. Accordingly, the acquired assets and assumed liabilities
were recorded at fair value as of the date of acquisition. The acquisition price
was allocated as follows:
<TABLE>
<S> <C>
Property and equipment $ 9,777,000
Intangible assets and deferred costs 50,987,000
Working capital (825,000)
Deferred income taxes payable (23,861,000)
--------------
$ 36,078,000
==============
</TABLE>
The acquisition was funded by $17,000,000 of borrowing under the Credit
Agreement, $15,000,000 of additional equity contribution by Sunrise and
available cash on hand.
The results of operations for the ten months ended December 31, 1997,
include operations of each Station from the respective date of acquisition. The
following table summarizes the unaudited consolidated pro forma results of
operations for the calendar years ended December 31, 1997 and 1996 assuming the
acquisition of all Stations had occurred on January 1, 1997 and 1996,
respectively:
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
--------- --------
1997 1996
---- ----
<S> <C> <C>
Net revenue $ 48,448,000 $ 47,480,000
Operating Income 1,408,000 1,336,000
Net (Loss) after tax benefit (9,922,000) (9,994,000)
Net (Loss) applicable to
Common shareholders (14,422,000) (14,494,000)
Net loss per share $ (14,422) (14,494)
Weighted average share outstanding 1,000 1,000
</TABLE>
The proforma information above is presented in response to applicable
accounting rules relating to business acquisitions and is not necessarily
indicative of the actual results that would have been achieved had each of the
Stations been acquired at the beginning on 1997 or 1996, nor is it
39
<PAGE> 40
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
indicative of the future results of operations.
4. PROPERTY AND EQUIPMENT:
The major classes of property and equipment are as follows:
<TABLE>
<CAPTION>
December 31, 1997 March 1, 1997
----------------- -------------
<S> <C> <C>
Land and improvements $ 2,536,679 $ 2,208,649
Buildings and improvements 8,726,962 5,691,714
Broadcast equipment 24,995,411 16,980,910
Vehicles 892,544 388,667
Furniture and computers 2,301,636 1,650,538
------------- --------------
39,453,232 26,920,478
Less: accumulated depreciation and
amortization (3,450,635) --
------------- --------------
$ 36,002,597 $ 26,920,478
============= ==============
</TABLE>
5. OBLIGATIONS FOR PROGRAM RIGHTS:
The aggregate scheduled maturities of program rights obligations subsequent to
December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 4,258,003
1999 3,951,862
2000 2,861,471
2001 1,380,158
2002 and thereafter 757,285
------------
13,208,779
Less: Current portion 4,258,003
------------
Long-term portion of program rights payable $ 8,950,776
============
</TABLE>
6. LONG-TERM DEBT:
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31, 1997 March 1, 1997
----------------- -------------
<S> <C> <C>
Term loan facility $ -- $ 60,000,000
Revolving credit facility 14,500,000 30,800,000
11% Senior subordinated notes 100,000,000 --
-------------- -------------
Total long-term debt 114,500,000 90,800,000
Less: current portion -- 90,800,000
-------------- -------------
$ 114,500,000 $ --
============== =============
</TABLE>
40
<PAGE> 41
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
To finance the Jupiter/Smith acquisition described in Note 3, the
Company entered into a Credit Agreement with Chase Manhattan Bank and
NationsBank of Texas, N.A., (the "Credit Agreement"), as agents for borrowings
up to $95.0 million. The Credit Agreement provides for (i) a seven-year term
loan facility in the amount of $60.0 million, maturing on February 27, 2004 (the
"Term Loan") and (ii) a seven-year revolving credit facility in the amount of
$35.0 million, expiring on February 27, 2004 (the "Revolving Credit Facility").
On March 25, 1997, the Company completed a private placement of $100,000,000
principal amount of its 11% Senior Subordinated Notes (the "Old Notes") due
March 15, 2007. Proceeds from the sale of the Old Notes were used to repay all
outstanding Term Loan and Revolving Credit borrowings facility under the Credit
Agreement and the Term Loan facility was cancelled. The remaining net proceeds
were available for general working capital purposes. On September 26, 1997, the
Company completed an exchange offer in which all the Old Notes were exchanged
for registered 11% Senior Subordinated Notes (the "New Notes") of the Company
having substantially the identical terms as the Old Notes. Availability under
the Revolving Credit Facility will be reduced starting in the year 2000.
The Revolving Credit Facility bears interest at an annual rate, at the
Company's option, equal to the applicable borrowing rate plus the applicable
margin as defined in the Credit Agreement (10% at December 31, 1997) or the
eurodollar rate plus the applicable margin as defined in the Credit Agreement
(8.44% at December 31, 1997). Interest rates on the revolving facility may be
reduced quarterly in the event the Company meets certain financial tests
relating to consolidated leverage.
The Credit Agreement provides for first priority security interests in
all of the tangible and intangible assets of the Company and its direct and
indirect subsidiaries. In addition, the loans under the Credit Agreement are
guaranteed by Sunrise and the Company's current direct and indirect and any
future subsidiaries. The Credit Agreement and the New Notes contains certain
financial and operating maintenance covenants including a maximum consolidation
leverage ratio (initially 7.0:1), a minimum consolidated fixed charge coverage
ratio (initially 1.05:1) and a consolidated interest coverage ratio (initially
1.25:1). The Company is limited in the amount of annual payments that may be
made for capital expenditures and corporate overhead.
The operating covenants of the Credit Agreement and the New Notes
include limitations on the ability of the Company to (i) incur additional
indebtedness (including film debt), other than certain permitted indebtedness,
(ii) permit additional liens or encumbrances, other than certain permitted
liens, (iii) make any investments in other persons, other than certain permitted
investments, (iv) become obligated with respect to contingent obligations, other
than certain permitted contingent obligations, and (v) make restricted payments
(including dividends on its common stock). The operating covenants also include
restrictions on certain specified fundamental changes, such as mergers and asset
sales, transactions with shareholders and affiliates and transactions outside
the ordinary course of business as currently conducted, amendments or waivers of
certain specified agreements and the issuance of guarantees or other credit
enhancements. At December 31, 1997, the Company was in compliance with the
financing and operating covenants or had obtained waivers of any violations.
Interest on the New Notes is payable semiannually on March 15 and
September 15 of each year. The New Notes will mature on March 15, 2007. Except
as described below, the Company may not redeem the New Notes prior to March 15,
2002. On and after such date, the Company may
41
<PAGE> 42
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
redeem the New Notes, in whole or in part, together with accrued and unpaid
interest, if any, to the redemption date. In addition, at any time and from time
to time on or prior to March 15, 2000, the Company may, subject to certain
requirements, redeem up to 25% of the aggregate principal amount of the New
Notes with the net cash proceeds from one or more public equity offerings at a
redemption price equal to 111% of the principal amount thereof plus accrued and
unpaid interest, if any, to the redemption date, provided that after any such
redemption, at least 75% of the aggregate principal amount of the New Notes
originally issued remain outstanding immediately after each such redemption. The
New Notes will not be subject to any sinking fund requirements. Upon a Change of
Control as defined, the Company will have the option, at any time on or prior to
March 15, 2002, to redeem the New Notes, in whole but not in part, at a
redemption price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest plus the Applicable Premium and if the New Notes are not
redeemed or if such Change of Control occurs after March 15, 2002, the Company
will be required to offer to repurchase the New Notes at a price equal to 101%
of the principal amount thereof, together with accrued and unpaid interest, if
any, to the repurchase date.
The New Notes are unsecured and subordinated in right of payment to all
existing and future Senior Indebtedness of the Company. The New Notes rank pari
passu with any future Senior Subordinated Indebtedness of the Company and will
rank senior to all other subordinated indebtedness of the Company. The Indenture
under which the New Notes were issued permits the Company and its Subsidiaries
to incur additional indebtedness, including Senior Indebtedness subject to
certain limitations.
Interest expense for the ten months ended December 31, 1997
consisted of the following:
<TABLE>
<S> <C>
Old and New Notes $ 8,463,888
Credit Agreement 1,030,151
Other 8,002
-------------
$ 9,502,041
=============
</TABLE>
7. REDEEMABLE PREFERRED STOCK:
In connection with the Jupiter / Smith acquisition, the Company issued
Redeemable Preferred Stock with an aggregate liquidation preference of $30.0
million, or $100 per share, which is entitled to quarterly dividends that will
accrue at a rate per annum of 14%. Prior to February 28, 2002, dividends may be
paid in either additional whole shares of Redeemable Preferred Stock or cash, at
the Company's option, and only in cash following that date. The New Notes and
the Credit Agreement prohibit the payment of cash dividends until May 31, 2002.
Pursuant to the terms of the securities purchase agreement, the Company has the
right to repurchase the Redeemable Preferred Stock at any time and from time to
time prior to March 1, 1998 at $96.50 per share of Redeemable Preferred Stock,
plus an amount equal to accrued and unpaid dividends through the repurchase
date.
The Redeemable Preferred Stock is subject to mandatory redemption (subject to
contractual and other restrictions with respect thereto and to the legal
availability of funds therefor) in whole on February 28, 2008, at a price equal
to the then effective liquidation preference thereof, plus all accumulated and
unpaid dividends to the date of redemption. Prior to February 28, 2008, the
Company has various options on redemption of the Redeemable Preferred Stock at
various redemption prices exceeding the liquidation preference.
42
<PAGE> 43
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
The Company may, at its option, subject to certain conditions,
including its ability to incur additional indebtedness under the New Notes and
the Credit Agreement, on any scheduled dividend payment date occurring on or
after the Redeemable Preferred Stock issuance date, exchange the Redeemable
Preferred Stock, in whole but not in part, for the Company's 14% Subordinated
Exchange Debentures due 2008 (the "Exchange Debentures"). Holders of the
Redeemable Preferred Stock will be entitled to receive $1.00 principal amount of
Exchange Debentures for each $1.00 in liquidation preference of Redeemable
Preferred Stock.
Holders of the Redeemable Preferred Stock have no voting rights, except
as otherwise required by law; however, the holders of the Redeemable Preferred
Stock, voting together as a single class, shall have the right to elect the
lesser of the two directors or 25% of the total number of directors constituting
the Board of Directors of the Company upon the occurrence of certain events,
including but not limited to, the failure by the Company on or after February
28, 2002, to pay cash dividends in full on the Redeemable Preferred Stock for
six or more quarterly dividend periods, the failure by the Company to discharge
any mandatory redemption or repayment obligation with respect to the Redeemable
Preferred Stock, the breach or violation of one or more of the covenants
contained in the Certificate of Designation, or the failure by the Company to
repay at final stated maturity, or the acceleration of the final stated maturity
of, certain indebtedness of the Company.
The Certificate of Designation for the Redeemable Preferred Stock and
the indenture for the Exchange Debentures contain covenants customary for
securities comparable to the Redeemable Preferred Stock and the Exchange
Debentures, including covenants that restrict the ability of the Company and its
subsidiaries to incur additional indebtedness, pay dividends and make certain
other restricted payments, to merge or consolidate with any other person or to
sell, assign, transfer, lease, convey, or otherwise dispose of all or
substantially all of the assets of the Company. Such covenants are substantially
identical to those covenants contained in the New Notes.
8. TRANSACTIONS WITH AFFILIATES:
On March 1, 1997, Sunrise and the Company entered into a ten-year
agreement (the "Monitoring and Oversight Agreement") with an affiliate of Hicks
Muse ("Hicks Muse Partners") pursuant to which Sunrise and the Company have
agreed to pay Hicks Muse Partners an annual fee payable quarterly for oversight
and monitoring services to the Company. The annual fee is adjustable on January
1, of each calendar year to an amount equal to 0.2% of the budgeted consolidated
annual net revenues of the Company and its subsidiaries for the then-current
fiscal year plus reimbursement of certain expenses. The Monitoring and Oversight
Agreement makes available the resources of Hicks Muse Partners concerning a
variety of financial and operational matters. The Company does not believe that
the services that have been, and will continue to be provided to the Company by
Hicks Muse Partners could otherwise be obtained by the Company without the
addition of personnel or the engagement of outside professional advisors. In the
Company's opinion, the fees provided for under the Monitoring and Oversight
Agreement reasonably reflect the benefits received and to be received, by
Sunrise and the Company. For the year ended December 31,1997, the Monitoring and
Oversight fee was $66,892 and reimbursed expenses amounted to $72,063.
On March 1, 1997, Sunrise and the Company entered into a ten-year
agreement (the "Financial Advisory Agreement") pursuant to which Hicks Muse
Partners received a financial
43
<PAGE> 44
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
advisory fee of 1.5% of the transaction value at the closing of the Jupiter /
Smith acquisition as compensation for its services as financial advisor to the
Company. Hicks Muse Partners is entitled to receive a fee equal to 1.5% of the
"transaction value" for each "add-on transaction" in which the Company is
involved. The term "transaction value" means the total value of the add-on
transaction including, without limitation, the aggregate amount of the funds
required to complete the add-on transaction (excluding any fees payable pursuant
to the Financial Advisory Agreement), including the amount of any indebtedness,
preferred stock or similar terms assumed (or remaining outstanding). The term
"add-on transaction" means any future proposal for a tender offer, acquisition,
sale, merger, exchange offer, recapitalization, restructuring or other similar
transaction directly involving the Company or any of its subsidiaries, and any
other person or entity. The Financial Advisory Agreement makes available the
resources of Hicks Muse Partners concerning a variety of financial and
operational matters. The Company does not believe that the services that have
been, and will continue to be provided by Hicks Muse Partners could otherwise be
obtained by the Company without the addition of personnel or the engagement of
outside professional advisors. In the Company's opinion, the fees provided for
under the Financial Advisory Agreement reasonably reflect the benefits received
and to be received by the Company.
On March 1, 1997, affiliates of Hicks Muse purchased $25.0 million of
the Redeemable Preferred Stock for a purchase price of approximately $24.1
million (or 96.5% of the initial liquidation preference of such shares) and
received in connection therewith warrants to purchase shares of common stock of
Sunrise. The Hicks Muse affiliates, along with the other purchaser of the
Redeemable Preferred Stock and warrants, received certain registration rights
with respect to the shares of common stock of Sunrise issuable upon exercise of
the warrants.
The Company has elected to participate in a Hicks Muse affiliate
insurance program which covers vehicles, buildings, equipment, libel and
slander, liability and earthquake damage. The Company pays actual invoice costs
and no employee of Hicks Muse is compensated for these services other than
through the above Monitoring and Oversight Agreement. Management believes the
amounts paid are attractive and representative of the services provided.
The Company has elected to participate in the Sunrise health, life,
vision and dental program, long and short-term disability, travel accident and
long-term care program. The Company is charged the same costs as any other
participating affiliate.
A defined contribution 401(k) savings plan is provided to employees of
the Company by Sunrise. Employees of the Company who have been employed for six
months, who have attained the age of 21 years and who have completed 1,000 hours
of service are generally eligible to participate. Certain employees represented
by various unions have elected not to participate in the Plan or have
established their own plans. Total contributions by the Company to the defined
contribution savings plan were $134,691 for the ten months ended December 31,
1997.
9. PENSION PLAN:
In October 1997, the Company approved the termination of two WJAC
non-contributory, defined benefit pension plans (the "Plans") covering
principally all full-time salaried and hourly employees and certain part-time
employees of WJAC. Effective December 31, 1997, the Company froze pension
benefits at the current level and suspended future benefit accruals. The Company
intends to terminate the Plans during 1998. The remaining pension plan asset and
any obligations associated with these Plans are immaterial to the Company's
consolidated financial position and results of operations.
44
<PAGE> 45
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
10. INCOME TAXES:
The Company files a consolidated federal income tax return with all
qualified subsidiaries. All nonqualifying subsidiaries file separate federal
income tax returns. The Company and certain subsidiaries file separate state
income tax returns. The benefit for income taxes consists of the following for
the ten months ended December 31, 1997:
45
<PAGE> 46
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
<TABLE>
<CAPTION>
Deferred Benefit:
<S> <C>
Federal $ (269,000)
State (30,000)
-----------
Total income tax benefit $ (299,000)
===========
</TABLE>
Deferred income taxes reflect the tax effect on temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Components of the
Company's net deferred tax liability as of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred Tax Assets:
Net operating loss (NOL) carryforward $ 2,735,000
Accrued expenses 198,000
Allowance for doubtful accounts 95,000
Other 82,000
-------------
3,110,000
-------------
Deferred Tax Liabilities:
Intangible assets (20,551,000)
Property and equipment (3,276,000)
-------------
(23,827,000)
-------------
Net deferred tax liability (20,717,000)
Less: Valuation allowance (2,845,000)
-------------
$ (23,562,000)
=============
</TABLE>
The Company has a federal and state NOL carryforward, which expire in
2017. The Company has provided a $2,845,000 valuation allowance against the
deferred tax assets created as a result of the NOL for the current tax reporting
period and for other deferred tax assets.
The reconciliation of the income tax benefit based on the federal
statutory federal income tax rate (34 percent) to the Company's income tax
benefit is as follows for the ten months ended December 31, 1997:
<TABLE>
<S> <C>
Tax benefit at the statutory rate $ (2,760,000)
State income tax benefit, net of federal tax benefit (417,000)
Valuation allowance 2,845,000
Other 33,000
-------------
$ (299,000)
=============
</TABLE>
11. COMMITMENT AND CONTINGENCIES:
Legal Proceedings
The Company is subject to legal proceedings and claims in the normal
course of business. In the opinion of management, after discussion with legal
counsel, the amount of ultimate liability with respect to these actions will not
materially affect the financial position or results of operations of the
Company.
46
<PAGE> 47
STC BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
Management Contracts
Effective March 1, 1997, the Company entered into five year employment
agreements with four members of senior management for minimum base compensation
of $250,000 and an annual bonus based upon criteria established by the Board of
Directors. If prior to the fourth anniversary of the executive officers
employment date, the executive officer terminates his employment for good reason
(as defined) or Sunrise or the Company terminate his employment for any reason
other than for cause (as defined), then such executive officer shall be paid his
salary and shall continue to be covered by certain employee benefit plans for 12
months or until the third anniversary of the employment date, whichever period
is longer; provided, however, that continued coverage under any employee benefit
plan of Sunrise or the Company shall terminate upon such executive officer
becoming eligible for comparable benefits pursuant to new employment. In the
event of a change of control (as defined in the agreements) prior to the fourth
anniversary of the Employment Date, either Sunrise, the Company or the executive
officer may terminate the employment agreement concurrently with sale and
receive the salary and benefits on the same terms described in the preceding
sentence.
Employees
At December 31, 1997, the Company had 376 full time and 37 part time
employees. The Company had 174 employees represented by five different labor
unions. One of the contracts expires in 1998, two in 1999, two in 2000, and one
in 2002. No significant labor problems have been experienced by the Stations.
The Company considers its overall labor relations to be good, however, there can
be no assurance that the Company's collective bargaining agreements will be
renewed in the future or that the Company will not experience a prolonged labor
dispute which could have a material adverse effect on the Company's business,
financial conditions and/or results of operations.
12. PENDING ACQUISITIONS:
On July 8, 1997, the Company entered into a purchase agreement ("ARTC
Purchase Agreement") with Abilene Radio and Television Company ("ARTC") to
acquire all of its outstanding common stock. ARTC owns KRBC-TV, channel 9, the
NBC affiliate for Abilene, Texas, and KACB-TV, channel 3, the NBC affiliate for
San Angelo, Texas. On December 30, 1997, the Company and ARTC entered into an
amendment to the ARTC Purchase Agreement that adjusted the purchase price to
$7,250,000 plus working capital. The transaction is expected to close on March
31, 1998. The ARTC Purchase Agreement is subject to customary conditions and no
assurances can be given as to whether, or on what terms, such transaction will
be consummated by the Company.
Unless applicable waiver standards are met, the FCC has a duopoly rule
which generally prohibits a single individual or entity from having an
attributable interest in two or more television stations with overlapping Grade
B service areas. The FCC has pending a rulemaking proceeding in which it has
proposed to modify the television duopoly rule to permit the common ownership of
television stations in different DMAs, so long as the Grade A service contours
of the stations do not overlap. On February 12,1998, the FCC conditioned the
transfer grant of the ARTC stations to the Company on the outcome of its
rulemaking proceedings. If the final ruling is adverse to the Company, the
Company would be required to sell one of the two stations to an unrelated party.
There can be no assurance as to the terms of such sales or that such sale would
not have a material adverse effect on the Company's business, financial
condition and results of operations.
In a series of transactions, the Company will acquire certain assets
from Hearst-Argyle
47
<PAGE> 48
Television, Inc., ("Hearst") through transactions structured as a Section 1031
tax deferred exchange of assets. On February 3, 1998, the Company agreed to
acquire WPTZ-TV ("WPTZ"), WNNE-TV ("WNNE"), and a LMA for WFFF-TV ("WFFF") from
Sinclair Broadcast Group, Inc. for $72.0 million, with the intention of using
these assets in the Hearst transaction. WPTZ and WNNE are the NBC affiliates and
WFFF is the Fox affiliate serving the Burlington, Vermont and Plattsburgh, New
York television market. On February 18, 1998, the Company agreed with
Hearst-Argyle Television, Inc. to trade KSBW-TV, WPTZ, and WNNE for WDTN-TV, the
ABC affiliate in Dayton, Ohio, WNAC-TV, the Fox affiliate in Providence, Rhode
Island, WNAC-TV's interest in a Joint Marketing Programming Agreement with
WPRI-TV, the CBS affiliate in Providence, Rhode Island, and approximately $22
million in cash. The transaction is expected to close by early in the third
quarter and is subject to Department of Justice and Federal Communications
Commission review.
13. SUBSEQUENT EVENT
On March 2, 1998, the Company agreed to sell to Robert N. Smith, the
President of Sunrise and Chief Executive Officer and Director of Sunrise and the
Company, the assets and certain rights and obligations to be acquired by the
Company related to WFFF from Sinclair Broadcasting Corp. Within ninety days of
the closing of the exchange of WPTZ and WNNE by the Company to Hearst-Argyle
Stations, Inc., Smith has agreed to pay the Company $500,000, which amount would
be increased to reflect any operating losses associated with WFFF subsequent to
the Company's commencement of operation of WFFF under a Time Brokerage
Agreement.
48
<PAGE> 49
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Jupiter/Smith TV Holdings, L.P.:
We have audited the accompanying combined statements of operations,
partners' equity and cash flows of Smith Television of Michigan, L.P., Smith
Television of Rochester, L.P., Smith Television - WTOV, L.P. and Smith
Television of Salinas-Monterey, L.P., and their respective licensed
subsidiaries, (collectively, the "Partnerships") for the two months ended
February 28, 1997, and the year ended December 31, 1996. These financial
statements are the responsibility of the Partnerships' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the results of the Partnerships'
operations and cash flows for the two months ended February 28, 1997, and the
year ended December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 2, on March 1, 1997, Jupiter/Smith TV Holdings,
LP. and Smith Broadcasting Partners, L.P. sold substantially all of the assets
of the Partnerships to STC Broadcasting, Inc. and Smith Acquisition Company.
Arthur Andersen, LLP
Tampa, Florida
February 18, 1998
49
<PAGE> 50
SMITH TELEVISION OF MICHIGAN, L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P., AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Year For the Two Months
Ended Ended
December 31, 1996 February 28, 1997
----------------- -----------------
<S> <C> <C>
REVENUES:
Broadcasting spot revenues, net of agency and national
representative commissions of $6,605,677 and
$861,100, respectively ................................ $ 34,063,438 $ 4,573,748
Network compensation ..................................... 2,752,359 465,400
Other revenue ............................................ 742,995 188,733
------------ -----------
Net revenues ...................................... 37,558,792 5,227,881
------------ -----------
EXPENSES:
Station operating ........................................ 13,631,192 2,260,185
Selling, general and administrative ...................... 8,513,562 1,525,923
Depreciation ............................................. 4,285,734 756,999
Amortization ............................................. 5,860,048 976,884
Corporate overhead ....................................... 840,135 146,000
------------ -----------
Total operating expenses .......................... 33,130,671 5,665,991
------------ -----------
Operating income (loss) ........................... 4,428,121 (438,110)
INTEREST INCOME ............................................ 92,882 20,662
INTEREST EXPENSE ,,,,,,,,,,,,,,,,,,......................... (6,072,477) (962,920)
OTHER INCOME, net .......................................... 1,459,770 18,522
------------ -----------
NET LOSS ................................................... $ (91,704) $(1,361,846)
============ ===========
</TABLE>
See accompanying notes to combined financial statements.
50
<PAGE> 51
SMITH TELEVISION OF MICHIGAN, L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P., AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
COMBINED STATEMENTS OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
For the Year For the Two Months
Ended Ended
December 31, 1996 February 28, 1997
----------------- -----------------
<S> <C> <C>
PARTNERS' EQUITY, beginning of period ...................... $ -- $36,313,296
Partners' contributions .................................. 36,405,000 --
Net loss ................................................. (91,704) (1,361,846)
------------ -----------
PARTNERS' EQUITY, end of period ............................ $ 36,313,296 $34,951,450
============ ===========
</TABLE>
See accompanying notes to combined financial statements.
51
<PAGE> 52
SMITH TELEVISION OF MICHIGAN, L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P., AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year For the Two Months
Ended Ended
December 31, 1996 February 28, 1997
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................. $ (91,704) $(1,361,846)
Adjustments to reconcile net loss to net cash provided
by operating activities -
Depreciation and amortization .......................... 10,145,782 1,733,883
Amortization of program rights ......................... 3,580,799 620,416
Payments on syndicated program and film obligations .... (3,590,265) (621,037)
(Increase) decrease in accounts receivable ............. (1,292,494) 1,210,423
Increase in other current assets ....................... (398,791) (246,862)
Increase in accounts payable and accrued expenses ...... 1,259,338 297,410
Loss on disposal of property and equipment ............. 33,118 --
------------- -----------
Net cash provided by operating activities ......... 9,645,783 1,632,387
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of television stations ...................... (105,353,237) --
Capital expenditures ..................................... (2,965,697) (263,644)
Proceeds from disposal of property and equipment ......... 65,889 --
Other .................................................... (45,104) 31,101
------------- -----------
Net cash used in investing activities ............. (108,298,149) (232,543)
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit agreement ........................... 68,300,000 --
Principal payments on credit agreement ................... (3,300,000) --
Partners' contributions .................................. 36,405,000 --
------------- -----------
Net cash provided by financing activities ......... 101,405,000 --
------------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS .................. 2,752,634 1,399,844
CASH AND CASH EQUIVALENTS, beginning of period ............. -- 2,752,634
------------- -----------
CASH AND CASH EQUIVALENTS, end of period ................... $ 2,752,634 $ 4,152,478
============= ===========
</TABLE>
See accompanying notes to combined financial statements.
52
<PAGE> 53
SMITH TELEVISION OF MICHIGAN, L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P., AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND FEBRUARY 28, 1997
1. ORGANIZATION AND NATURE OF OPERATIONS:
The accompanying financial statements present the combined results of
operations, partners' equity and cash flows for the year ended December 31, 1996
and the two months ended February 28, 1997 of four limited partnerships: Smith
Television of Michigan, L.P., Smith Television of Rochester, L.P., Smith
Television - WTOV, L.P. and Smith Television of Salinas-Monterey, L.P., and
their respective licensed subsidiaries (collectively, the "Partnerships"). The
Partnerships own the following commercial television stations: WEYI, Saginaw,
Flint and Bay City, Michigan; WROC, Rochester, New York; WTOV, Wheeling, West
Virginia and Steubenville, Ohio; and KSBW, Monterey-Salinas, California
(collectively, the "Stations"). Stations WEYI, WTOV and KSBW are NBC affiliates
and station WROC is a CBS affiliate. The Partnerships are controlled by
Jupiter/Smith TV Holdings, L.P. ("Jupiter/Smith") and Smith Broadcasting
Partners, L.P. ("SBP"). Under the terms of the Partnerships' agreements, SBP is
the managing general partner. Income and loss is generally allocated based on
capital contribution percentages. The Partnerships were formed on December 13,
1995 and acquired the Stations in January 1996 for a total purchase price of
approximately $105,400,000, including transaction fees and working capital.
The combined financial statements reflect the acquisitions of the
Stations under the purchase method of accounting. Accordingly, the acquired
assets and liabilities were recorded at fair value as of the date of
acquisition. The acquisition price of approximately $105,400,000 was allocated
based upon appraised values resulting in approximately $27,600,000, $71,800,000
and $6,000,000 being assigned to property and equipment, intangibles (including
deferred financing and organizational costs), and working capital, respectively.
The transaction was funded by the Credit Agreement and partners' contributions.
Management does not consider the results of operations of the Stations from
January 1, 1996, to the dates the Stations were acquired to be significant.
2. SALE OF THE ASSETS OF THE PARTNERSHIPS:
On March 1, 1997, Jupiter/Smith and SBP completed the sale of
substantially all of the assets of the Partnerships to STC Broadcasting, Inc.
("STC") and Smith Acquisition Company ("SAC") for an aggregate sales price of
approximately $157,000,000. In connection with the sale, STC and SAC will assume
the Partnerships' television programming obligations, certain accounts payable
and accrued liabilities, and certain other obligations relating to the
operations of the Stations after the closing date. The Partnerships will retain
all other liabilities of the Partnerships, including the Credit Agreement with
Chase Manhattan Bank.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying financial statements include the combined accounts of
the Partnerships. The Partnerships are combined because of common ownership,
management and relationship of operations. All material items and transactions
between the Partnerships have been eliminated.
Cash and Cash Equivalents
The Partnerships consider all highly liquid investments with a maturity
of three months or less to be cash equivalents.
53
<PAGE> 54
SMITH TELEVISION OF MICHIGAN, L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P., AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
Concentration of Risk and Accounts Receivable
The Partnerships serve the Saginaw, Flint and Bay City, Michigan;
Rochester, New York; Wheeling, West Virginia and Steubenville, Ohio; and
Monterey and Salinas, California, demographic areas. Accordingly, the revenue
potential of the Partnerships is dependent on the economy in these diverse
areas. The Partnerships monitor their accounts receivable through continuing
credit evaluations. Historically, the Partnerships have not had significant
uncollectible accounts.
Program Rights
The Partnerships have agreements with distributors for the rights to
television programming over contract periods which generally run from one to
four years. Each contract is recorded as an asset and liability when the license
agreement is signed. Program rights and the corresponding obligation are
classified as current or long-term based on the estimated usage and payment
terms. The capitalized cost of program rights is amortized on a straight-line
basis over the period of the program rights agreements, which approximates
amortization based on the estimated number of showings.
Property and Equipment
Property and equipment acquired in purchase transactions are recorded
at the estimate of fair value based upon independent appraisals and property and
equipment acquired subsequent thereto are recorded at cost. Property and
equipment are depreciated using the straight-line method over the estimated
useful lives of the assets, as follows:
<TABLE>
<S> <C>
Buildings................................................ 39 years
Broadcast equipment...................................... 5 - 15 years
Automobiles.............................................. 3 years
Furniture and computers.................................. 5 years
</TABLE>
Expenditures for maintenance and repairs are charged to operations as
incurred, whereas expenditures for renewals and betterments are capitalized.
Intangible Assets
Intangible assets consist principally of values assigned to the Federal
Communications Commission (FCC) licenses and network affiliation agreements of
the Stations. Intangible assets are being amortized on the straight-line basis
primarily over 15 years.
Revenue Recognition
The Company's primary source of revenue is the sale of television time
to advertisers. Revenue is recorded when the advertisements are broadcast.
54
<PAGE> 55
SMITH TELEVISION OF MICHIGAN L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P. AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
Impairment of Long-Lived Assets
Long-lived assets and identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount should be addressed. The Partnerships have determined there has
been no impairment in the carrying value of long-lived assets of Stations as of
December 31, 1996 or February 28, 1997.
Deferred Charges
Deferred charges are being amortized over the applicable loan period
(84 month period) on a straight-line basis, and organization costs are being
amortized over a 60-month period on a straight-line basis.
Trade/Barter Transactions
Trade/barter transactions involve the exchange of advertising time for
products and/or services. Trade/barter transactions are recorded based on the
fair market value of the products and/or services received. Revenue is recorded
when advertising schedules air and expense is recognized when products and/or
services are used or received.
Income Taxes
No income tax provision has been included in the financial statements
since income or loss of the Partnerships is required to be reported by the
partners on their respective income tax returns.
Allocation of Partnerships' Loss
The Partnerships' loss for the year ended December 31, 1996 and the
two months ended February 28, 1997 is allocated as described by the Partnership
Agreement.
Supplemental Cash Flow Disclosures
Cash paid for interest during 1996 was $5,974,847 and $0 for the two
months ended February 28, 1997. In addition, the Partnerships acquired new
contracts for television program obligations in the amount of $698,861 during
1996 and $0 for the two months ended February 28, 1997.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
reported amounts of revenues and expenses during the reporting period. The
preparation of financial statements in conformity with generally accepted
accounting principles also requires management to make estimates and assumptions
that affect the disclosures of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from those estimates.
55
<PAGE> 56
SMITH TELEVISION OF MICHIGAN L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P. AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
4. CREDIT AGREEMENT
To finance the acquisitions described in Note 1 and to provide for
future operating capital, the Partnerships entered into a Credit Agreement with
Chase Manhattan Bank, N.A. (the "Credit Agreement"), as administrative agent for
borrowings of up to $72,000,000. The borrowings are collateralized by all of the
Partnerships' assets and all outstanding Partnership interests.
Under the Credit Agreement, the Partnerships have the option to
maintain domestic and Eurodollar loans. Interest on borrowings under this
agreement are at varying rates based, at the Partnerships' option, on the banks'
prime rate or the London Interbank Offering Rate (LIBOR), plus a fixed percent,
and are adjusted based upon the ratio of total debt to earnings before interest,
taxes, depreciation, and amortization. The weighted average interest rate during
1996 and the two months ended February 28, 1997 was 9.08% and 8.9%
respectively. Additionally, commitment fees of 0.5% are payable quarterly.
Under the existing Credit Agreement, the Partnerships agree to abide by
restrictive covenants which place limitations upon payments of cash
distributions, issuance of Partnership interest, investment transactions and the
incurrence of additional obligations. In addition, the Partnerships must
maintain specified levels of operating cash flow and comply with other financial
covenants.
Upon the sale of assets on February 28, 1997, the Credit Agreement was
paid in full from the proceeds.
5. AFFILIATE TRANSACTIONS:
The Partnerships pay SBP, the general partner of the Partnerships, to
provide certain management services. The Partnerships recorded expense of
$840,135 in 1996 and $146,000 for the two months ended February 28, 1997 for
these services. Management believes these amounts are reasonable and
representative of the services provided. The agreement terminates upon the sale
of the Stations' assets.
The Partnerships have elected to participate in an affiliate insurance
program which covers automobiles, buildings, equipment, libel and slander,
liability and earthquake damage. The Partnerships pay actual invoice costs and
no employee of the affiliate or SBP is compensated for these services other than
through the above management fee. Management believes the amounts paid are
reasonable and representative of the services provided.
The Partnerships have elected to participate in an affiliate health,
life, vision and dental program, long and short term disability, travel accident
and long-term care program. The Partnerships are charged the same costs as any
other participating affiliate. No employee of the affiliate or SBP is
compensated for these services other than through the above management fee.
Management believes the amounts paid are reasonable and representative of the
services provided.
A defined contribution savings plan (401k) (the "Plan") is provided to
employees of the Partnerships by an affiliate. Employees of the Partnerships who
have been employed for six months, who have attained the age of 21 years and who
have completed 1,000 hours of service are generally eligible to participate.
Certain employees represented by various unions have elected not to participate
in the
56
<PAGE> 57
SMITH TELEVISION OF MICHIGAN L.P.
SMITH TELEVISION OF ROCHESTER, L.P.
SMITH TELEVISION - WTOV, L.P. AND
SMITH TELEVISION OF SALINAS-MONTEREY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
Plan or have established their own plans. Amounts contributed to the Plan by the
Partnerships amounted to $131,429 in 1996 and $35,682 for the two months ended
February 28, 1997.
Management believes the costs incurred in connection with the above
affiliate programs approximate the costs that would be incurred if the
Partnerships procured such services on a stand-alone basis.
6. OTHER INCOME:
Other income for the periods indicated consisted of the following:
<TABLE>
<CAPTION>
For the Year For the Two Months
Ended Ended
December 31, 1996 February 28, 1997
----------------- -----------------
<S> <C> <C>
Payment received from an unaffiliated network, net .. $ 1,500,000 $ --
Loss on disposal of equipment ....................... (33,118) --
Other ............................................... (7,112) 18,522
------------ -----------
$ 1,459,770 $ 18,522
============ ===========
</TABLE>
During 1996, the Partnerships agreed to provide certain services to an
unaffiliated national television network and agreed to potentially swap one of
its Stations for one of the unaffiliated network's stations. The Partnerships
have provided all services required by the network. The Partnerships received
$1,500,000 for these services.
7. CONTINGENCIES:
The Partnerships are subject to legal proceedings and claims in the
ordinary course of business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position or results of operations of the Partnerships.
57
<PAGE> 58
TELEVISION STATIONS WEYI, WROC AND WTOV
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To STC Broadcasting, Inc.:
We have audited the accompanying combined statements of operations and
cash flows of television stations WEYI, WROC and WTOV, stations owned by
Television Station Partners, L.P., for the year ended December 31, 1995. These
financial statements are the responsibility of the management of STC
Broadcasting, Inc. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of television stations WEYI, WROC and WTOV for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
Arthur Andersen, LLP
Dallas, TX
February 7, 1997
58
<PAGE> 59
TELEVISION STATIONS WEYI, WROC AND WTOV
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
REVENUES:
Broadcasting spot revenues, net of agency and national
representative commissions of $3,793,321 .................. $ 21,267,176
Network compensation .......................................... 1,893,670
Other revenue ................................................. 306,600
------------
Net revenues ........................................... 23,467,446
------------
EXPENSES:
Station operating ............................................. 14,957,246
Amortization of program rights ................................ 2,189,842
Depreciation and amortization ................................. 1,341,200
------------
Total operating expenses ............................... 18,488,288
------------
Operating income ....................................... 4,979,158
------------
OTHER EXPENSES .................................................. (623,082)
------------
NET INCOME ...................................................... $ 4,356,076
============
</TABLE>
See accompanying notes to combined financial statements.
59
<PAGE> 60
TELEVISION STATIONS WEYI, WROC AND WTOV
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .................................................... $ 4,356,076
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization ............................... 1,341,200
Amortization of program rights .............................. 2,189,842
Payments on program rights .................................. (2,565,029)
Increase in accounts receivable ............................. (558,277)
Decrease in other assets .................................... 198,125
Decrease in accounts payable and accrued liabilities ........ (489,685)
Other ....................................................... (81,338)
------------
Net cash provided by operating activities .............. 4,390,914
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment ........................... (323,571)
------------
Net cash used in investing activities .................. (323,571)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net transfers to Television Station Partners, L.P. ............ (3,889,426)
------------
Net cash used in financing activities .................. (3,889,426)
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ....................... 177,917
CASH AND CASH EQUIVALENTS, beginning of year .................... 531,993
------------
CASH AND CASH EQUIVALENTS, end of year .......................... $ 709,910
============
</TABLE>
See accompanying notes to combined financial statements.
60
<PAGE> 61
TELEVISION STATIONS WEYI, WROC AND WTOV
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND NATURE OF OPERATIONS:
The accompanying financial statements present the combined results of
operations and cash flows for the years ended December 31, 1995, of three
commercial television stations: WEYI, Saginaw, Flint and Bay City, Michigan;
WROC, Rochester, New York; and WTOV, Wheeling, West Virginia and Steubenville,
Ohio (collectively, the "Stations"). Stations WEYI and WTOV are NBC affiliates
and station WROC is a CBS affiliate. The Stations are owned by Television
Station Partners, L.P. (the "Partnership"), a Delaware limited partnership which
was organized on May 24, 1989. The Stations, along with another television
station, were acquired by the Partnership on July 7, 1989.
2. AGREEMENT TO SELL THE STATIONS:
On April 13, 1995, the Partnership entered into an agreement to sell
the Stations to Jupiter/Smith Television Holdings, L.P. (the "Buyer") for
approximately $63,200,000 plus an amount equal to the excess of the current
assets over the current liabilities assumed by the Buyer, as defined in the
Asset Purchase Agreement, to be paid in cash at the closing of the sale. On
January 3, 1996, the sale of the Stations was finalized for a total sales price
of $73,150,000, including transaction fees and working capital.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying combined financial statements include the combined
accounts of the Stations. The Stations are combined because of common ownership,
management and relationship of operations. All material items and transactions
between the Stations have been eliminated.
Cash and Cash Equivalents
The Stations consider all highly liquid investments with a maturity of
three months or less to be cash equivalents.
Concentration of Risk and Accounts Receivable
The Stations serve the Saginaw, Flint and Bay City Michigan; Rochester,
New York; Steubenville, Ohio, and Wheeling, West Virginia, demographic areas.
Accordingly, the revenue potential of the Stations is dependent on the economy
in these areas. The Stations monitor their accounts receivable through
continuing credit evaluations. Historically, the Stations have not had
significant uncollectible accounts that had not previously been provided for in
the allowance for doubtful accounts.
Program Rights
Program rights and the corresponding contractual obligations are
recorded at gross cost when purchased and when the programs are available for
their first showing. The capitalized cost of program rights is amortized on a
straight-line basis over the period of the program rights agreements, or usage,
whichever yields the greater accumulated amortization.
61
<PAGE> 62
TELEVISION STATIONS WEYI, WROC AND WTOV
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets, as follows:
<TABLE>
<S> <C>
Buildings and tower......................................................... 20 - 30 years
Automobiles................................................................. 3 years
Furniture and fixtures...................................................... 5 - 8 years
Machinery and equipment..................................................... 5 - 20 years
</TABLE>
Intangible Assets
Intangible assets are comprised principally of values assigned to the
Federal Communications Commission licenses and network affiliation agreements
arising from the acquisition of the Stations. Intangible assets are being
amortized on the straight-line basis primarily over 40 years. Intangible assets
are periodically evaluated for impairment using a measurement of fair value.
Revenue Recognition
The Company's primary source of revenue is the sale of television time
to advertisers. Revenue is recorded when the advertisements are broadcast.
Impairment of Long-Lived Assets
Long-lived assets and identifiable intangibles to be held and used are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount should be addressed. The Partnership has determined
that as of December 31, 1995, there has been no impairment in the carrying value
of the long-lived assets of the Stations.
Trade/Barter Transactions
Trade/barter transactions involve the exchange of advertising time for
products and/or services. Trade/barter transactions are recorded on the fair
market value of the products and/or services received. Revenue is recorded when
advertising schedules air and expense is recognized when products and/or
services are used.
Income Taxes
No income tax provision has been included in the financial statements
since income or loss of the Stations is required to be reported by the partners
of the Partnership on their respective income tax returns.
Supplemental Cash Flow Disclosures
Property and equipment totaling $115,097 was acquired in 1995, in
exchange for advertising time. In addition, the Stations acquired new contracts
for television program obligations in the amount of $310,044 in 1995.
62
<PAGE> 63
TELEVISION STATIONS WEYI, WROC AND WTOV
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. AFFILIATE TRANSACTIONS:
The Partnership's general partner is entitled to a management fee
pursuant to a management agreement. These management fees are for services
rendered on behalf of the Partnership's four stations and are not allocated to
or accounted for on the individual stations' financial statements. Management
fees due to the general partner were approximately $919,000 for the year ended
December 31, 1995.
5. COMMITMENTS AND CONTINGENCIES:
The Stations are subject to legal proceedings and claims in the
ordinary course of business. In the opinion of the management of STC
Broadcasting, Inc., the amount of ultimate liability with respect to these
actions will not materially affect the results of operations of the Stations.
63
<PAGE> 64
TELEVISION STATION KSBW
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To STC Broadcasting, Inc.:
We have audited the accompanying statements of operations and cash
flows of television station KSBW, a station owned by E.P. Communications, Inc.,
for the year ended December 31, 1995. These financial statements are the
responsibility of the management of STC Broadcasting, Inc. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
television station KSBW for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.
Arthur Andersen, LLP
Dallas, Texas
February 7, 1997
64
<PAGE> 65
TELEVISION STATION KSBW
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
<TABLE>
<S> <C>
REVENUES:
Broadcasting spot revenues, net of agency and national
representative commissions of $1,658,863 .................. $ 8,505,825
Network compensation .......................................... 650,581
Other revenue ................................................. 281,149
------------
Net revenues ........................................... 9,437,555
EXPENSES:
Station operating ............................................. 5,771,698
Amortization of program rights ................................ 990,709
Depreciation and amortization ................................. 2,777,619
------------
Total operating expenses ............................... 9,540,026
------------
Operating loss ......................................... (102,471)
OTHER EXPENSES .................................................. (11,309)
------------
NET LOSS ........................................................ $ (113,780)
============
</TABLE>
See accompanying notes to combined financial statements.
65
<PAGE> 66
TELEVISION STATION KSBW
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ...................................................... $ (113,780)
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation and amortization ............................... 2,777,619
Amortization of program rights .............................. 990,709
Payments on program rights .................................. (986,955)
Increase in accounts receivable ............................. (241,804)
Increase in other assets .................................... (16,764)
Increase in accounts payable and accrued liabilities ........ 69,938
Other ....................................................... 27,812
------------
Net cash provided by operating activities .............. 2,506,775
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment ........................... (426,025)
------------
Net cash used in investing activities .................. (426,025)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net transfers to GHTV, Inc. and E.P. Communications, Inc. ..... (2,089,240)
------------
Net cash used in financing activities .................. (2,089,240)
------------
NET DECREASE IN CASH AND CASH EQUIVALENTS ....................... (8,490)
CASH AND CASH EQUIVALENTS, beginning of year .................... 174,888
------------
CASH AND CASH EQUIVALENTS, end of year .......................... $ 166,398
============
</TABLE>
See accompanying notes to combined financial statements.
66
<PAGE> 67
TELEVISION STATION KSBW
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND NATURE OF OPERATIONS:
The accompanying financial statements present the results of operations
and cash flows for the year ended December 31, 1995 of television station KSBW
(the "Station"). The Station is an NBC affiliate that serves the Salinas and
Monterey, California, demographic markets. The Station, along with another
television station, is owned by E.P. Communications, Inc. ("EPC"), an S.
corporation incorporated in the state of California on March 3, 1994. The
Station was acquired by E.P. Communications, Inc. on September 21, 1994 from
GHTV, Inc. for approximately $22,727,965.
The financial statements reflect the acquisition of the Station by EPC
under the purchase method of accounting. Accordingly, the acquired assets and
liabilities were recorded at fair value as of the date of EPC's acquisition of
the Station.
2. AGREEMENT TO SELL THE TELEVISION STATION:
On August 31, 1995, EPC signed a letter of intent to sell the Station
to Jupiter/Smith Television Holdings, L.P. (the "Buyer") for approximately
$28,000,000 plus an amount equal to the excess of the current assets over the
current liabilities assumed by the Buyer, as defined in the Asset Purchase
Agreement, to be paid in cash at the closing of the sale. On January 17, 1996,
the sale of the Station was finalized for a total sales price of $32,250,000,
including transaction fees and working capital.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
The Station considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
Concentration of Risk and Accounts Receivable
The Station serves the Salinas and Monterey, California, demographic
areas. Accordingly, the revenue potential of the Station is dependent on the
economy in this area. The Station monitors its accounts receivable through
continuing credit evaluations. Historically, the Station has not had significant
uncollectible accounts that had not previously been provided for in the
allowance for doubtful accounts.
Program Rights
Program rights and the corresponding contractual obligations are
recorded at gross cost when the license period begins and the programs are
available for their first showing. The capitalized cost of program and film
rights is amortized on a straight-line basis over the period of the program and
film rights agreements, which approximates amortization based on the estimated
number of showings.
67
<PAGE> 68
TELEVISION STATION KSBW
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
Property and Equipment
Property and equipment acquired in purchase transactions are recorded
at the estimate of fair value based upon independent appraisals and property and
equipment acquired subsequent thereto are recorded at cost. Property and
equipment are depreciated using the straight-line method over the estimated
useful lives of the assets, as follows:
<TABLE>
<S> <C>
Buildings and tower....................... 25 - 30 years
Automobiles............................... 3 - 5 years
Furniture and fixtures.................... 5 - 10 years
Machinery and equipment................... 5 - 20 years
</TABLE>
Expenditures for maintenance and repairs are charged to operations as
incurred.
Intangible Assets
Intangible assets are comprised principally of values assigned to the
Federal Communications Commission license and network affiliation agreement
arising from the acquisition of the Station. Intangible assets are being
amortized on the straight-line basis primarily over 40 years. Intangible assets
are periodically evaluated for impairment using a measurement of fair value.
Revenue Recognition
The Company's primary source of revenue is the sale of television time
to advertisers. Revenue is recorded when the advertisements are broadcast.
Impairment of Long-Lived Assets
Long-lived assets and identifiable intangibles to be held and used are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount should be addressed. Management has determined that as
of December 31, 1995, there has been no impairment in the carrying value of the
long-lived assets of the Stations.
Trade/Barter Transactions
Trade/barter transactions involve the exchange of advertising time for
products and/or services. Trade/barter transactions are recorded on the fair
market value of the products and/or services received. Revenue is recorded when
advertising schedules air and expense is recognized when products and/or
services are used.
Income Taxes
EPC is incorporated as an S corporation. Accordingly, for federal
income tax purposes, EPC is not subject to an income tax at the corporate level
since EPC's net income or loss is required to be reported by its shareholders on
their respective income tax returns.
68
<PAGE> 69
TELEVISION STATION KSBW
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1995
Supplemental Cash Flow Disclosures
The Station acquired new contracts for television program obligations
in the amounts of $859,560 in 1995.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. AFFILIATE TRANSACTIONS:
Corporate expenses, debt and related interest expense of EPC are not
allocated to its stations. Accordingly, such items are not reflected on the
accompanying statement of operations.
5. COMMITMENTS AND CONTINGENCIES:
The Station is subject to legal proceedings and claims in the ordinary
course of its business. In the opinion of the management of STC Broadcasting,
Inc., the amount of ultimate liability with respect to these actions will not
materially affect the results of operations of the Station.
69
<PAGE> 70
SCHEDULE II
STC BROADCASTING, INC. AND SUBSIDIARIES
-------
TELEVISION STATIONS WEYI, WROC, WTOV AND KSBW
-------
TELEVISION STATIONS WEYI, WROC AND WTOV
-------
TELEVISION STATION KSBW
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
----------- --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
STC BROADCASTING, INC.
Allowance for doubtful accounts
Ten months ended December 31, 1997 $ -- $ 49 $ 346(1) $ 109 $ 286
TELEVISION STATIONS WEYI,
WROC, WTOV AND KSBW
Allowance for doubtful accounts
Two months ended February 28, 1997 $ 223 $ 16 $ -- $ 21 $ 218
Year ended December 31, 1996 -- 121 329(1) 227 223
TELEVISION STATIONS WEYI,
WROC AND WTOV
Allowance for doubtful accounts
Year ended December 31, 1995 $ 319 $ 124 $ -- $ 108 $ 335
TELEVISION STATION KSBW
Allowance for doubtful accounts
Year ended December 31, 1995 $ 140 $ 31 $ -- $ 112 $ 59
</TABLE>
(1) Amount represents allowance for doubtful account balances purchased in
connection with the acquisition of certain television stations during
1997.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None to Report
70
<PAGE> 71
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the executive
officers and directors of Sunrise and the Company as of March 1, 1998.
<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
Robert N. Smith 53 President of Sunrise and Chief Executive Officer and
Director of Sunrise and the Company
Sandy DiPasquale 50 President and Chief Operating Officer of the Company
and Executive Vice President and Chief Operating
Officer of Sunrise
David A. Fitz 53 Senior Vice President and Chief Financial Officer
of Sunrise and the Company
John M. Purcell 55 Regional Vice President of Sunrise and the Company
Eric C. Neuman 53 Vice President and Director of Sunrise and the Company
John R. Muse 47 Chairman of the Board of Directors of Sunrise and the
Company
Michael J. Levitt 39 Director of Sunrise and the Company
John H. Massey 58 Director of Sunrise and the Company
</TABLE>
Mr. Smith has served in the broadcast industry for 18 years and served
as President of Sunrise and Chief Executive Officer and Director of Sunrise and
the Company since their formation. Since 1985, Mr. Smith has served as President
and majority stockholder of SBG, which owns, operates and manages seven
television stations in addition to the Company's Stations, and has served as
Chief Executive Officer of SBP, an affiliate of SBG. From 1983 to 1985, Mr.
Smith served as an officer, director and part owner of Heritage Broadcasting
Company, which was the licensee of WCTI-TV, New Bern, North Carolina. Mr. Smith
first became involved with the television broadcast industry as an attorney in
the Broadcast Bureau of the FCC from 1971 to 1974. Thereafter, Mr. Smith's
career included substantial government service, including serving on the White
House Staff in 1977 and as Assistant Director for Community Services
Administration from 1977 to 1979, prior to returning full time to the broadcast
industry in 1983.
Mr. DiPasquale has served in the broadcast industry for 18 years and
served as President of the Company and Executive Vice President and Chief
Operating Officer of Sunrise since their formation. From January of 1996 through
February of 1997, Mr. DiPasquale served as Chief Operating Officer of SBP and
was responsible for the day-to-day operations and from November 1994 to January
1996 was associated with SBG. From 1989 to 1994, Mr. DiPasquale served as
President, Chief Executive Officer and was a part owner of SD Communications,
Inc., KBS, Limited Partnership and KBS, Inc., which were the owners of KWCH-TV,
Wichita, Kansas, and its affiliated stations in Hays, Goodland and Dodge City,
Kansas. From 1986 to 1988, Mr. DiPasquale served as President and General
Manager and was a partner in WGRZ-TV, Buffalo, New York. Prior to such time, Mr.
DiPasquale served in sales and management positions at various television
broadcast stations in the Buffalo area.
Mr. Fitz has served in the broadcast industry for 20 years and served
as Senior Vice President and Chief Financial Officer of Sunrise and the Company
since their formation. From January 1996 through February 1997, Mr. Fitz served
as Chief Financial Officer of SBP and as an officer and director of each of the
SBG affiliated companies. Mr. Fitz has held various positions with SBG
affiliated companies since 1986. Prior to joining SBG, Mr. Fitz served for nine
years as Executive Vice President and Chief Financial Officer of the Broadcast
Division of Gulf Broadcast Company, which at that time owned six television and
eight radio broadcast stations. Prior to that
71
<PAGE> 72
time, Mr. Fitz was a manager with KPMG Peat Marwick, which he joined in 1969.
Mr. Purcell has served in the broadcast industry for 35 years and
served as Regional Vice President of Sunrise and the Company and as General
Manager of WROC-TV, Rochester, New York, since March 1997. From January 1996,
through February 1997, Mr. Purcell served as Senior Vice President of SBP and
General Manager of WROC-TV, Rochester, New York. From November 1994, to January
1996, Mr. Purcell was associated with SBG. From 1986 to September 1994, Mr.
Purcell served as Vice President and General Manager of WHTM-TV, Harrisburg,
Pennsylvania, an SBG-owned station. Prior to such time, Mr. Purcell served as
President and General Manager of WGHP-TV, Greensboro, North Carolina, and as
Vice President and Director of Sales of WTSP-TV, Tampa/St. Petersburg, Florida.
Mr. Neuman has served as Vice President and as a director of the
Company and Sunrise since its formation. Since May 1993, Mr. Neuman has been an
officer of Hicks Muse and is currently serving as Senior Vice President. Mr.
Neuman has served as a Vice President and director of Chancellor since April
1996 and as an Executive Vice President and Director of Capstar since October
1996. From 1985 to 1993, Mr. Neuman was a Managing General Partner of
Communications Partners, Ltd., a private investment firm specializing in media
and communications businesses.
Mr. Muse has served as Chairman of the Board of Directors of the
Company and Sunrise since its formation. Mr. Muse is Chief Operating Officer of
Hicks Muse. Prior to the formation of Hicks Muse in 1989, Mr. Muse headed the
merchant/investment banking operations of Prudential Securities in the
Southwestern region of the United States. Mr. Muse serves as Chairman of Atrium
Companies, Inc., Hedstrom Corporation and Hat Brands, Inc. and serves as
director of the Morningstar Group, Inc., Crain Holdings Corp., Ghirardelli
Chocolate Company, Olympus Real Estate Corporation, Mandeville, S.A. and
Productos del Monte, S.A. de C.V.
Mr. Levitt has served as a director of the Company and Sunrise since
its formation. Mr. Levitt is a Managing Director and Principal of Hicks Muse.
Before joining Hicks Muse, Mr. Levitt was a Managing Director and Deputy Head of
Investment Banking with Smith Barney Inc. from 1993 through 1995. From 1986
through 1993, Mr. Levitt was with Morgan Stanley & Co. Incorporated most
recently as a Managing Director responsible for the New York-based Financial
Entrepreneurs Group. Mr. Levitt also serves as a director of Atrium Companies,
Inc., Ghirardelli Chocolate Company and International Home Foods, Inc.
Mr. Massey has served as a director of the Company and Sunrise since
its formation. Until August 2, 1996, Mr. Massey served as the Chairman of the
Board and Chief Executive Officer of Life Partners Group, Inc., an insurance
holding company, having assumed those offices in October 1994. Prior to joining
Life Partners, he served, since 1992, as the Chairman of the Board of, and
currently serves as a director of, FSW Holdings, Inc., a regional investment
banking firm. Since 1986, Mr. Massey has served as a director of Gulf-California
Broadcast Company, a private holding company, that was sold in May 1996. From
1986 to 1992, he also was President of Gulf-California Broadcast Company. From
1976 to 1986, Mr. Massey was President of Gulf Broadcast Company, which owned
and operated 6 television stations and 11 radio stations in major markets in the
United States. Mr. Massey currently serves as a director of Chancellor, Central
Texas Bankshare Holdings, Inc., Hill Bank and Trust Co., Hill Bancshares
Holdings, Inc., Bank of the Southwest of Dallas, Texas, Columbus State Bank,
Columbine JDS Systems, Inc., and the Paragon Group, Inc.
All directors hold office for one year terms and until their successors
are duly elected and qualified. In May 1997, the Board of Directors of the
Company established an Executive Committee to which Messrs. Massey, Muse and
Neuman have been appointed, and an Audit Committee and Compensation Committee to
which Messrs. Levitt, Massey and Neuman have been appointed. Directors of the
Company are elected by Sunrise, the sole stockholder of the Company.
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<PAGE> 73
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to
its Chief Executive Officer and each of its most highly compensated executive
officers whose total cash compensation for the period March 1, 1997 through
December 31, 1997 exceed $100,000.
<TABLE>
<CAPTION>
All Other
Name and Principal Position Salary Bonus Other Compensation(1) Compensation(2)
- --------------------------- ------ ----- --------------------- ---------------
<S> <C> <C> <C> <C>
Robert N. Smith
Chief Executive Officer $201,923 $50,000 $3,759 $2,300
Sandy DiPasquale
Chief Operating Officer $201,923 $50,000 $4,152 $2,300
David A. Fitz
Chief Financial Officer $201,923 $50,000 $5,000 $2,225
John M. Purcell
Regional Vice President $209,264 - $8,680 $1,763
David LaFrance
Vice President and
General Manager WEYI-TV $141,346 $25,000 - $2,016
</TABLE>
(1) Dollar value of premiums for life insurance reimbursed by the company.
(2) Represents amounts contributed by the Company to the Sunrise 401(k)
Savings Plan, a non-discriminatory retirement plan established pursuant
to Section 401(k) of the Internal Revenue Code.
Employment Agreements
In connection with the Acquisition, each of Robert N. Smith, Sandy
DiPasquale, David A. Fitz and John M. Purcell has entered into five-year
employment agreements with the Company and Sunrise. Each employment agreement is
subject to automatic successive one-year renewal terms that take effect unless
notice of non-renewal is given by either party to the agreement at least 120
days prior to the expiration of the initial term or annual extension, as the
case may be. The compensation provided Messrs. Smith, DiPasquale, Fitz and
Purcell under their respective agreements includes an annual base salary of
$250,000 each, subject to adjustment at the sole discretion of the Board of
Directors of Sunrise and the Company, and an annual bonus based upon criteria to
be established by the Board of Directors of Sunrise and the Company at the
beginning of each fiscal year. These executives are also entitled to participate
in certain benefit plans of Sunrise and the Company. If prior to the fourth
anniversary of the Employment Date, the executive officer terminates his
employment for good reason (as defined) or Sunrise or the Company terminate his
employment for any reason other than for cause (as defined), then such executive
officer shall be paid his salary and shall continue to be covered by certain
employee benefit plans for 12 months or until the third anniversary of the
employment date, whichever period is longer; provided, however, that continued
coverage under any employee benefit plan of Sunrise or the Company shall
terminate upon such executive officer becoming eligible for comparable benefits
pursuant to new employment. In the event of a change of control (as defined in
the agreements) prior to the fourth anniversary of the Employment Date, either
Sunrise, the Company or the executive officer may terminate the employment
agreement concurrently with sale and receive the salary and benefits on the same
terms described in the preceding sentence.
Mr. Smith's employment agreement requires him to devote his best
efforts and such time, attention, knowledge and skill to the operation of the
Stations as is necessary to manage and supervise the Stations and the Company.
Mr. Fitz's employment agreement requires him to devote
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<PAGE> 74
his best efforts and his working time, attention, knowledge and skill solely to
the operation of the Stations; provided, however, that Mr. Fitz is permitted to
devote reasonable time to advisory services and oversight duties in connection
with Mr. Smith's investments in other business enterprises having an interest in
or operating a television station within certain excluded markets in which Mr.
Smith currently holds an interest in a television station (the "Excluded
Markets") and any acquisition or investment in up to three additional excluded
stations (the "Excluded Stations").
Each employment agreement also contains a noncompetition provision,
which provides that during the term of each agreement and for a period of two
years thereafter (or one year, if Hicks Muse or its affiliates cease to own any
of the Stations) and during any period in which the executive officer is
receiving severance payments pursuant to the employment agreement, such
executive officer will not engage in the television broadcast business within
the DMA of any Station. Mr. Smith's employment agreement permits him to invest
in, become employed by or otherwise render services to or for (i) another
business enterprise (other than the Company) having an interest in or operating
a television station within the Excluded Markets and (ii) after an opportunity
to acquire or invest shall have been presented to the Company and the Company
shall have declines in writing to make such acquisition or investment, the
Excluded Stations. Mr. Fitz's employment agreement permits him to invest in,
become employed by or otherwise render services to or for another business
enterprise (other than the Company) having an interest in or operating a
television station within the Excluded Markets.
401(k) Savings Plan
Effective as of March 1, 1997, the Company adopted the 401(k) Savings
Plan (the "Plan"), which covers employees of the Company and subsidiaries who
have attained the age of 21. An employee may contribute up to an aggregate of
15% of annual compensation to the Plan, subject to statutory limitations. The
Company will match 100% of each employee's contribution up to 3% of employee
base salary or $3,000 which ever is less. Contributions are allocated to each
employee's individual account, which is intended to be invested in various funds
according to the direction of the employee. All four highly compensated
executive officers participate in the Plan.
Director Compensation
Directors of the Company who are employees of the Company, Sunrise or
Hicks Muse serve without additional compensation. Independent directors of the
Company receive an annual retainer of $12,000. These independent directors also
receive $1,000 for each meeting of the Board of Directors attended and $1,000
for each committee meeting attended. In addition, the independent directors are
reimbursed for any expenses incurred in connection with their attendance at such
meetings. Currently, John H. Massey is the Company's only independent director.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company has 1,000 shares of Common Stock, $0.01 par value per
share, issued and outstanding, all of which are owned by Sunrise, whose address
is 3839 4th Street North, Suite 420, St. Petersburg, Florida 33703. All of the
capital stock of Sunrise is owned by Sunrise Television Partners, L.P. (the
"Partnership") of which the ultimate managing partner is Thomas O. Hicks, an
affiliate of Hicks Muse.
Affiliates of Hicks Muse have purchased $25.0 million of the Company's
Redeemable Preferred Stock for a price of approximately $24.1 million (or 96.5%
of the initial liquidation preferences of such shares) and received, in
connection therewith, warrants to purchase shares of common stock of Sunrise.
The Hicks Muse affiliates, along with the other purchasers of the Redeemable
Preferred Stock and warrants, received certain registration rights with respect
to the shares of common stock of Sunrise issuable upon exercise of the warrants.
74
<PAGE> 75
Robert N. Smith (through SBG), Sandy DiPasquale, David A. Fitz and John
M. Purcell own 100% of the Class B limited partnership interest in the
Partnership, and together with other management employees have purchased an
aggregate of 2.9% of the Class A Interest of the Partnership for $1.9 million.
The return on the Class B ownership interest is based on the performance of
Sunrise and the Company. Neither the Class A nor Class B interest owned by
limited partners have any rights to participate in the management or control of
the Partnership or its business.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 1, 1997, Sunrise and the Company entered into a ten-year
agreement (the "Monitoring and Oversight Agreement") with an affiliate of Hicks
Muse ("Hicks Muse Partners") pursuant to which Sunrise and the Company have
agreed to pay Hicks Muse Partners an annual fee payable quarterly for oversight
and monitoring services to the Company. The annual fee is adjustable on January
1, of each calendar year to an amount equal to 0.2% of the budgeted consolidated
annual net sales of the Company and its subsidiaries for the then-current fiscal
year plus reimbursement of certain expenses. The Monitoring and Oversight
Agreement makes available the resources of Hicks Muse Partners concerning a
variety of financial and operational matters. The Company does not believe that
the services that have been, and will continue to be provided to the Company by
Hicks Muse Partners could otherwise be obtained by the Company without the
addition of personnel or the engagement of outside professional advisors. In the
Company's opinion, the fees provided for under the Monitoring and Oversight
Agreement reasonably reflect the benefits received and to be received, by
Sunrise and the Company. For the ten months ended December 31, 1997, the
Monitoring and Oversight Fee was $66,892 and reimbursed expenses amounted to
$72,063.
On March 1, 1997, Sunrise and the Company entered into a ten-year
agreement (the "Financial Advisory Agreement") pursuant to which Hicks Muse
Partners received a financial advisory fee of $2.5 million at the closing of the
Jupiter/Smith acquisition and $0.5 million on the WJAC acquisition as
compensation for its services as financial advisor to the Company in connection
with the acquisitions. Hicks Muse Partners also is entitled to receive a fee
equal to 1.5% of the "transaction value" for each "add-on transaction" in which
the Company is involved. The term "transaction value" means the total value of
the add-on transaction including, without limitation, the aggregate amount of
the funds required to complete the add-on transaction (excluding any fees
payable pursuant to the Financial Advisory Agreement), including the amount of
any indebtedness, preferred stock or similar terms assumed (or remaining
outstanding). The term "add-on transaction" means any future proposal for a
tender offer, acquisition, sale, merger, exchange offer, recapitalization,
restructuring or other similar transaction directly involving the Company or any
of its subsidiaries, and any other person or entity. The Financial Advisory
Agreement makes available the resources of Hicks Muse Partners concerning a
variety of financial and operational matters. The Company does not believe that
the services that have been, and will continue to be provided by Hicks Muse
Partners could otherwise be obtained by the Company without the addition of
personnel or the engagement of outside professional advisors. In the Company's
opinion, the fees provided for under the Financial Advisory Agreement reasonably
reflect the benefits received and to be received by the Company.
On February 28, 1997, the Company purchased substantially all the
assets of the Stations from Jupiter/Smith for approximately $157.0 million. SBP
had an ownership interest in and managed the Stations prior to the acquisition.
Robert N. Smith (the President of Sunrise and the Chief Executive Officer and
Director of Sunrise and the Company), is the majority owner of SBG, which is a
partner in SBP. In addition, Sandy DiPasquale (the President and Chief Operating
Officer of the Company and Executive Vice President and Chief Operating Officer
of Sunrise), David A. Fitz (Senior Vice President and Chief Financial Officer of
Sunrise and the Company) and John M. Purcell
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<PAGE> 76
(Regional Vice President of Sunrise and the Company) are partners in SBP. SBP,
SBG and Messrs. DiPasquale, Fitz and Purcell received approximately $10.0
million of the initial acquisition consideration. The Company believes that the
terms of the acquisition were comparable to the terms that would be reached in
an arm's-length transaction with unrelated third parties. See "Item 12. Security
Ownership of Certain Beneficial Owners and Management."
The Company has elected to participate in a Hicks Muse affiliate
insurance program which covers automobiles, buildings, equipment, libel and
slander, liability and earthquake damage. The Company pays actual invoice costs
and no employee of Hicks Muse is compensated for these services other than
through the above Monitoring and Oversight Agreement. Management believes the
amounts paid are reasonable and representative of the service provided.
The Company has elected to participate in the Sunrise health, life,
vision and dental program, long and short-term disability, travel accident and
long-term care program. The Company is charged the same costs as any other
participating affiliate.
On March 2, 1998, the Company agreed to sell to Robert N. Smith, the
President of Sunrise and Chief Executive Officer and Director of Sunrise and the
Company, the assets and certain rights and obligations to be acquired by the
Company related to WFFF from Sinclair Broadcasting Corp. Within ninety days of
the closing of the exchange of WPTZ and WNNE by the Company to Hearst-Argyle
Stations, Inc., Smith has agreed to pay the Company $500,000, which amount would
be increased to reflect any operating losses associated with WFFF subsequent to
the Company's commencement of operation of WFFF under a Time Brokerage
Agreement.
ITEM 14. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K
(a) 1.
Financial Statements
STC Broadcasting, Inc.
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of December 31, 1997 and March 1, 1997
Consolidated Statement of Operations for the ten months ended December
31, 1997
Consolidated Statement of Stockholder's Equity for the ten months
ended December 31, 1997
Consolidated Statement of Cash Flows for the ten months ended
December 31, 1997
Notes to Consolidated Financial Statements
Smith Television of Michigan, L.P.
Smith Television of Rochester, L.P.
Smith Television - WTOV, L.P.
Smith Television of Salinas-Monterey, L.P.
Report of Independent Certified Public Accountants
Combined Statements of Operations for the Year ended December 31,
1996 and the two months ended February 28, 1997
Combined Statements of Partners' Equity for the year ended
December 31, 1996 and the two months ended February 28, 1997
Combined Statements of Cash Flows for the year ended December 31,
1996 and the two months ended February 28, 1997
Notes to Combined Financial Statements
Television Stations WEYI, WROC and WTOV
Report of Independent Certified Public Accountants
Combined Statement of Operations for the year ended December 31, 1995
Combined Statement of Cash Flows for the year ended December 31, 1995
Notes to Combined Financial Statements
Television Station KSBW
Report of Independent Certified Public Accountants
Combined Statement of Operations for the year ended December 31, 1995
Combined Statement of Cash Flows for the year ended December 31, 1995
Notes to Combined Financial Statements
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<PAGE> 77
a(2)
Financial Statement Schedule
Schedule II Valuation and Qualifying Accounts
a(3)
Exhibits
<TABLE>
<S> <C>
2.1 Asset Purchase Agreement, dated as of November 4, 1996, by and
among Smith Television of Michigan, L.P., Smith Television of
Michigan License L.P., Smith Television of Rochester, L.P.,
Smith Television of Rochester License, L.P., Smith Television
of Salinas-Monterey, L.P., Smith Television of
Salinas-Monterey License, L.P., as Sellers, and STV
Acquisition Company (now known as STC Broadcasting Inc.), as
buyer. *
2.2 Asset Purchase Agreement, dated as of November 4, 1996, by and
among Smith Television-WTOV, L.P. and Smith Television-WTOV
License, L.P., as Sellers, and Smith Acquisition Company, as
Buyer. *
2.3 Agreement and Plan of Merger, dated as of May 9, 1997, by and
among STC Broadcasting, Inc., WJAC Acquisition Corp and WJAC,
Incorporated. *
2.4 Stock Purchase Agreement, dated as of July 8, 1997, by and
among STC Broadcasting, Inc., Abilene Radio and Television
Company and the stockholders named therein. *
2.5 1st Amendment to Stock Purchase Agreement dated as of December
30, 1997, by and among STC Broadcasting, Inc., Abilene Radio
and Television Company and the stockholders named therein (1)
2.6 Asset Purchase Agreement dated as of February 3, 1998 by and
among Tuscaloosa Broadcasting, Inc., as sellers and STC
Broadcasting of Vermont, Inc. as Buyer (1)
2.7 Asset Exchange Agreement dated as of February 18, 1998 by and
among STC Broadcasting, Inc., STC Broadcasting of Vermont,
Inc., STC License Company, STC Broadcasting of Vermont
Subsidiary, Inc. and Hearst-Argyle Stations, Inc. (1)
3.1 Amended and Restated Certificate of Incorporation of STV
Acquisition Company (now known as STC Broadcasting, Inc.) *
3.2 Certificate of Designation for the 14% Redeemable
Preferred Stock *
3.3 Certificate of Amendment to the Certificate of Designation for
the 14% Redeemable Preferred Stock *
3.4 Amended and Restated Bylaws of STC Broadcasting, Inc. *
4.1 Indenture, dated as of March 25, 1997, between STC
Broadcasting, Inc., and U.S. Trust Company of Texas, N.A.,
relating to the outstanding 11% Senior Subordinated Notes due
2007. *
4.2 Form of Old Note (included in Exhibit 4.1, Exhibit A) *
4.3 Form of New Note (included in Exhibit 4.1, Exhibit B) *
10.1 Credit agreement, dated as of February 28, 1997, by and among
STC Broadcasting, Inc., as Borrower, NationsBank of Texas,
N.A., as Documentation Agent, The Chase Manhattan Bank, as
Administrative and Syndication Agent, and the lenders party
thereto. *
10.2 Guarantee and Collateral Agreement, dated as of February 28,
1997, by STC Broadcasting, Inc., certain of its subsidiaries,
and Sunrise Television Corp. in favor of the Chase Manhattan
Bank. *
10.3 First amendment, dated March 25, 1997, to the Credit
Agreement, dated February 28, 1997, by and among STC
Broadcasting, Inc., as Borrower, NationsBank of Texas, N.A.,
as Documentation Agent, The Chase Manhattan Bank, as
Administrative and Syndication Agent, and the lenders party
thereto. *
10.4 Exchange and Registration Rights Agreement, dated March 25,
1997, by and among
</TABLE>
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<TABLE>
<S> <C>
STC Broadcasting, Inc., Chase Securities Inc., NationsBanc
Capital Markets, Inc., and Schroder Wertheim
& Co., Incorporated. *
10.5 Employment Agreement, dated as of February 28, 1997, by and
between Sunrise Television Corp., STC Broadcasting, Inc. and
Robert N. Smith * (2)
10.6 Employment Agreement, dated as of February 28, 1997, by and
between Sunrise Television Corp., STC Broadcasting, Inc. and
David A. Fitz * (2)
10.7 Employment Agreement, dated as of February 28, 1997, by and
between Sunrise Television Corp., STC Broadcasting, Inc. and
Sandy DiPasquale * (2)
10.8 Employment Agreement, dated as of February 28, 1997, by and
between Sunrise Television Corp., STC Broadcasting, Inc. and
John M. Purcell * (2)
10.9 Monitoring and Oversight Agreement, dated as of February 28,
1997, by and among Sunrise Television Corp., STC Broadcasting,
Inc. and Hicks, Muse and Co. Partners, L.P. *
10.10 Financial Advisory Agreement, dated as of February 28, 1997,
by and among Sunrise Television Corp., STC Broadcasting, Inc.
and Hicks, Muse & Co. Partners, L.P. *
10.11 Securities Purchase Agreement, dated as of February 28, 1997,
by and among Sunrise Television Corp., STC Broadcasting, Inc.,
Hicks, Muse, Tate & Furst Equity Fund III, L.P. and Chase
Equity Associates *
10.12 Deposit Escrow Agreement, dated as of November 4, 1996 by and
among Smith Television of Michigan, L.P., Smith Television of
Michigan License, L.P., Smith Television of Rochester, L.P.,
Smith Television of Rochester License, L.P., Smith Television
of Salinas-Monterey, L.P., Smith Television of
Salinas-Monterey License, L.P., Smith Television-WTOV, L.P.
and Smith Television-WTOV License, L.P., Hicks, Muse, Tate &
Furst Equity Fund III, L.P., STV Acquisition Company (now
known as STC Broadcasting, Inc.) and Smith Acquisition
Company *
10.13 Promissory Note, dated February 28, 1997, by Smith Acquisition
Company, in the original principal amount of $28,500,000
payable to STC Broadcasting, Inc. *
10.14 Letter Agreement, dated November 4, 1996, by and among STV
Acquisition Company (now known as STC Broadcasting, Inc.),
Smith Acquisition Company and Robert N. Smith *
10.15 Letter Agreement, dated February 28, 1997, by and among Smith
Broadcasting Partners, L.P., SBPII, L.P. and Smith Acquisition
Company *
10.16 Affiliation Agreement, dated July 10, 1995,
between National Broadcasting Company, Inc. and WEYI
Associates (WEYI-TV) *
10.17 Letter Agreement, dated December 15, 1995, between NBC
Television Network and Smith Broadcasting Group, Inc., on
behalf of Smith Television of Michigan License, L.P.
(WEYI-TV) *
10.18 Affiliation Agreement, dated January 12, 1995, between CBS
Television Network and Television Station Partners, L.P.
(WROC-TV) *
10.19 Affiliation Agreement, dated December 20, 1995, among the
National Broadcasting Company, Inc., Television Station
Partners, L.P. and WTOV Associates (WTOV-TV) *
10.20 Affiliation Agreement, dated March 8, 1995, between American
Broadcasting Companies, Inc. and WTOV Associates (WTOV-TV) *
10.21 Affiliation Agreement, dated March 20, 1996, between National
Broadcasting Company, Inc. and Smith Broadcasting Partners,
L.P. (KSBW-TV) *
10.22 Collective Bargaining Agreement, dated August 8, 1994, between
WEYI-TV and International Union, United Automobile, Aerospace
and Agricultural Implement Workers of America. *
10.23 Collective Bargaining Agreement, dated, June 1, 1993, between
Television Stations Partners (WROC-TV) and American Federation
of Television and Radio Artists *
10.24 Collective Bargaining Agreement, dated June 1, 1996, between
WROC-TV and National Association of Broadcast Employees and
Technicians *
10.25 Collective Bargaining Agreement, dated March 3, 1997, between
WROC-TV and the American Federation of Television and Radio
Artists *
</TABLE>
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<PAGE> 79
<TABLE>
<S> <C>
10.26 Agreement, dated December 1, 1994, between International
Brotherhood of Electrical Workers and Television Station
Partners (WTOV-TV)*
10.27 Agreement, dated January 29, 1996, between American Federation
of Television and Radio Artists and Smith Broadcasting Group,
Inc. (WTOV-TV) *
10.28 Purchase Agreement, dated March 19, 1997, by and among STC
Broadcasting, Inc., Chase Securities Inc., NationsBanc Capital
Markets, Inc. and Schroder Wertheim & Co., Incorporated *
10.29 Shareholders' Voting Agreement, dated May 9, 1997, by
and among STC Broadcasting, Inc., WJAC Acquisition Corp. and
certain shareholders of WJAC, Incorporated. *
10.30 Deposit Escrow Agreement, dated May 9, 1997, by and among STC
Broadcasting, Inc., WJAC Acquisition Corp., WJAC, Incorporated
and Mellon Bank, N.A. *
10.31 Deposit Escrow Agreement, dated July 8, 1997, by and
among STC Broadcasting, Inc., Abilene Radio and Television
Company and the stockholders named therein *
10.32 First Amendment to Deposit Escrow dated as of
December 30, 1997, by and among STC Broadcasting, Inc. as
Buyer, stockholders named therein as Sellers, and George Mason
Bank, as escrow agent. (1)
10.33 Deposit Escrow Agreement
dated February 3, 1998 by and among STC Broadcasting of
Vermont, as buyer, Tuscaloosa Broadcasting, Inc., WPTZ
Licensee, Inc. and WNNE Licensee, Inc., as sellers and George
Mason Bank as deposit escrow agent. (1)
10.34 Waiver, dated March 11, 1998, to the Credit Agreement, dated
February 28, 1997, by and among STC Broadcasting, Inc., as
Borrower, NationsBank of Texas, N.A., as Documentation Agent,
The Chase Manhattan Bank, as Administrative and Syndication
Agent, and the lenders party thereto. (1)
10.35 Affiliation Agreement, dated December 16, 1994 between NBC
Television Network and WJAC, Inc., (WJAC-TV) (1)
10.36 Collective Bargaining Agreement, dated October 2, 1997, by and
between WJAC-TV and International Alliance of Theatrical Stage
Employees, Moving Picture Technicians, Artists and Allied
Crafts of the United States of America, TSBE Local 902. (1)
10.37 Collective Bargaining Agreement, dated December 1, 1997, by
and between WTOV-TV and International Brotherhood of
Electrical Workers. (1)
10.38 Management Agreement dated October 1, 1997 between WJAC,
Incorporated and STC Broadcasting, Inc. (1)
10.39 Intercompany Loan Agreement dated October 1, 1997 between
WJAC, Incorporated and STC Broadcasting, Inc. (1)
10.40 Guaranty given as of February 3, 1998 by STC Broadcasting, Inc
as Guarantor to Tuscaloosa Broadcasting, Inc., WPTZ Licensee,
Inc. and WNNE Licensee, Inc. as sellers (1)
10.41 Guaranty given as of February 3, 1998 by Sinclair Broadcasting
Group, Inc. as Guarantor to STC Broadcasting of Vermont, Inc.
as buyer (1)
10.42 Guaranty given as of February 18, 1998 by Hearst-Argyle
Television, Inc., as Guarantor to STC Broadcasting of Vermont,
Inc., STC License Company and STC Broadcasting of Vermont
Subsidiary, Inc. (1)
12 Statement fixed charge ratio (1)
21.1 Subsidiaries of STC Broadcasting, Inc. (1)
27 Financial Data Schedule (1)
99.1 WJAC-Incorporated
Report of Independent Certified Public Accountants
Consolidated Balance Sheet as of September 30, 1997
Consolidated Statement of Operations for the nine months
ended September 30, 1997
</TABLE>
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<TABLE>
<S> <C>
Consolidated Statement of Stockholders' Equity for the nine
months ended September 30, 1997
Consolidated Statement of Cash Flows for the nine months ended
September 30, 1997
Notes to Consolidated Financial Statements (1)
</TABLE>
* Incorporated by reference to the Registration Statement on Form S-1
(File No. 333-29555) of STC Broadcasting, Inc. as filed with the
Securities and Exchange Commission.
(1) Filed herewith
(2) Management contracts and compensatory plans or arrangements
(b) Reports on Form 8-K
1. Current Report on Form 8-K filed on October 16, 1997,
reporting consummation of the acquisition of WJAC,
Incorporated in which the Company acquired all of the
outstanding common stock of WJAC, Incorporated for
approximately $34,600,000. Financial statements and proforma
financial statements were incorporated by reference.
<PAGE> 81
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of St. Petersburg, State of Florida, on the
23rd day of March 1998.
STC Broadcasting, Inc.
By: /s/ Robert N. Smith
------------------------
Robert N. Smith
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert N. Smith Chief Executive Officer March 23, 1998
---------------------------- (Principal Executive Officer)
Robert N. Smith and Director
/s/ Sandy DiPasquale President and March 23, 1998
--------------------------- Chief Operating Officer
Sandy DiPasquale
/s/ David A. Fitz Chief Financial Officer March 23, 1998
---------------------------
David A. Fitz
/s/ John R. Muse Chairman of the Board of March 23, 1998
--------------------------- Directors
John R. Muse
/s/ Eric C. Neuman Director March 23, 1998
---------------------------
Eric C. Neuman
/s/ Michael J. Levitt Director March 23, 1998
---------------------------
Michael J. Levitt
/s/ John H. Massey Director March 23, 1998
---------------------------
John H. Massey
</TABLE>
<PAGE> 82
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description of Document
------- -----------------------
No.
---
<S> <C>
2.1 Asset Purchase Agreement, dated as of November 4, 1996, by and
among Smith Television of Michigan, L.P., Smith Television of
Michigan License, L.P., Smith Television of Rochester, L.P.,
Smith Television of Rochester License, L.P., Smith Television
of Salinas-Monterey, L.P., Smith Television of
Salinas-Monterey License, L.P., as Sellers, and STV
Acquisition Company (now known as STC Broadcasting Inc.), as
buyer. *
2.2 Asset Purchase Agreement, dated as of November 4, 1996, by and
among Smith Television-WTOV, L.P. and Smith Television-WTOV
License, L.P., as Sellers, and Smith Acquisition Company, as
Buyer. *
2.3 Agreement and Plan of Merger, dated as of May 9, 1997, by and
among STC Broadcasting, Inc., WJAC Acquisition Corp and WJAC,
Incorporated. *
2.4 Stock Purchase Agreement, dated as of July 8, 1997, by and
among STC Broadcasting, Inc., Abilene Radio and Television
Company and the stockholders named therein. *
2.5 1st Amendment to Stock Purchase Agreement dated as of December
30, 1997, by and among STC Broadcasting, Inc., Abilene Radio
and Television Company and the stockholders named therein (1)
2.6 Asset Purchase Agreement dated as of February 3, 1998 by and
among Tuscaloosa Broadcasting, Inc., as sellers and STC
Broadcasting of Vermont, Inc. as Buyer (1)
2.7 Asset Exchange Agreement dated as of February 18, 1998 by and
among STC Broadcasting, Inc., STC Broadcasting of Vermont,
Inc., STC License Company, STC Broadcasting of Vermont
Subsidiary, Inc. and Hearst-Argyle Stations, Inc. (1)
3.1 Amended and Restated Certificate of Incorporation of STV
Acquisition Company (now known as STC Broadcasting, Inc.) *
3.2 Certificate of Designation for the 14% Redeemable Preferred Stock *
3.3 Certificate of Amendment to the Certificate of Designation for
the 14% Redeemable Preferred Stock *
3.4 Amended and Restated Bylaws of STC Broadcasting, Inc. *
4.1 Indenture, dated as of March 25, 1997, between STC
Broadcasting, Inc., and U.S. Trust Company of Texas, N.A.,
relating to the outstanding 11% Senior Subordinated Notes due
2007. *
4.2 Form of Old Note (included in Exhibit 4.1, Exhibit A) *
4.3 Form of New Note (included in Exhibit 4.1, Exhibit B) *
10.1 Credit agreement, dated as of February 28, 1997, by and among
STC Broadcasting, Inc., as Borrower, NationsBank of Texas,
N.A., as Documentation Agent, The Chase Manhattan Bank, as
Administrative and Syndication Agent, and the lenders party
thereto. *
10.2 Guarantee and Collateral Agreement, dated as of February 28,
1997, by STC Broadcasting, Inc., certain of its subsidiaries,
and Sunrise Television Corp. in favor of the Chase Manhattan
Bank.*
10.1 First amendment, dated March 25, 1997, to the Credit
Agreement, dated February 28, 1997, by and among STC
Broadcasting, Inc., as Borrower, NationsBank of Texas, N.A.,
as Documentation Agent, The Chase Manhattan Bank, as
Administrative and Syndication Agent, and the lenders party
thereto. *
10.4 Exchange and Registration Rights Agreement, dated March 25,
1997, by and among STC Broadcasting, Inc., Chase Securities
Inc., NationsBanc Capital Markets, Inc., and Schroder Wertheim
& Co., Incorporated. *
10.5 Employment Agreement, dated as of February 28, 1997, by and
between Sunrise Television Corp., STC Broadcasting, Inc. and
Robert N. Smith * (2)
</TABLE>
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10.6 Employment Agreement, dated as of February 28, 1997, by and
between Sunrise Television Corp., STC Broadcasting, Inc. and
David A. Fitz * (2)
10.7 Employment Agreement, dated as of February 28, 1997, by and
between Sunrise Television Corp., STC Broadcasting, Inc. and
Sandy DiPasquale * (2)
10.8 Employment Agreement, dated as of February 28, 1997, by and
between Sunrise Television Corp., STC Broadcasting, Inc. and
John M. Purcell * (2)
10.9 Monitoring and Oversight Agreement, dated as of February 28,
1997, by and among Sunrise Television Corp., STC Broadcasting,
Inc. and Hicks, Muse and Co. Partners, L.P. *
10.10 Financial Advisory Agreement, dated as of February 28, 1997,
by and among Sunrise Television Corp., STC Broadcasting, Inc.
and Hicks, Muse & Co. Partners, L.P. *
10.11 Securities Purchase Agreement, dated as of February 28, 1997,
by and among Sunrise Television Corp., STC Broadcasting, Inc.,
Hicks, Muse, Tate & Furst Equity Fund III, L.P. and Chase
Equity Associates *
10.12 Deposit Escrow Agreement, dated as of November 4, 1996 by and
among Smith Television of Michigan, L.P., Smith Television of
Michigan License, L.P., Smith Television of Rochester, L.P.,
Smith Television of Rochester License, L.P., Smith Television
of Salinas-Monterey, L.P., Smith Television of
Salinas-Monterey License, L.P., Smith Television-WTOV, L.P.
and Smith Television-WTOV License, L.P., Hicks, Muse, Tate &
Furst Equity Fund III, L.P., STV Acquisition Company (now
known as STC Broadcasting, Inc.) and Smith Acquisition Company*
10.13 Promissory Note, dated February 28, 1997, by Smith Acquisition
Company, in the original principal amount of $28,500,000
payable to STC Broadcasting, Inc. *
10.14 Letter Agreement, dated November 4, 1996, by and among STV
Acquisition Company (now known as STC Broadcasting, Inc.),
Smith Acquisition Company and Robert N. Smith *
10.15 Letter Agreement, dated February 28, 1997, by and among Smith
Broadcasting Partners, L.P., SBPII, L.P. and Smith Acquisition
Company *
10.16 Affiliation Agreement, dated July 10, 1995, between National
Broadcasting Company, Inc. and WEYI Associates (WEYI-TV) *
10.17 Letter Agreement, dated December 15, 1995, between NBC
Television Network and Smith Broadcasting Group, Inc., on
behalf of Smith Television of Michigan License, L.P. (WEYI-TV)*
10.18 Affiliation Agreement, dated January 12, 1995, between CBS
Television Network and Television Station Partners, L.P.
(WROC-TV) *
10.19 Affiliation Agreement, dated December 20, 1995, among the
National Broadcasting Company, Inc., Television Station
Partners, L.P. and WTOV Associates (WTOV-TV)*
10.20 Affiliation Agreement, dated March 8, 1995, between American
Broadcasting Companies, Inc. and WTOV Associates (WTOV-TV) *
10.21 Affiliation Agreement, dated March 20, 1996, between National
Broadcasting Company, Inc. and Smith Broadcasting, Partners,
L.P. (KSBW-TV) *
10.22 Collective Bargaining Agreement, dated August 8, 1994, between
WEYI-TV and International Union, United Automobile, Aerospace
and Agricultural Implement Workers of America. *
10.23 Collective Bargaining Agreement, dated, June 1, 1993, between
Television Stations Partners (WROC-TV) and American Federation
of Television and Radio Artists *
10.24 Collective Bargaining Agreement, dated June 1, 1996, between
WROC-TV and National Association of Broadcast Employees and
Technicians *
10.25 Collective Bargaining Agreement, dated March 3, 1997, between
WROC-TV and the American Federation of Television and Radio
Artists *
10.26 Agreement, dated December 1, 1994, between International
Brotherhood of Electrical Workers and Television Station
Partners (WTOV-TV) *
10.27 Agreement, dated January 29, 1996, between American Federation
of Television and Radio Artists and Smith Broadcasting Group,
Inc. (WTOV-TV) *
</TABLE>
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10.28 Purchase Agreement, dated March 19, 1997, by and among STC
Broadcasting, Inc., Chase Securities Inc., NationsBanc Capital
Markets, Inc. and Schroder Wertheim & Co., Incorporated *
10.29 Shareholders' Voting Agreement, dated May 9, 1997, by and
among STC Broadcasting, Inc., WJAC Acquisition Corp. and
certain shareholders of WJAC, Incorporated. *
10.30 Deposit Escrow Agreement, dated May 9, 1997, by and among STC
Broadcasting, Inc., WJAC Acquisition Corp., WJAC,
Incorporated and Mellon Bank, N.A. *
10.31 Deposit Escrow Agreement, dated July 8, 1997, by and among STC
Broadcasting, Inc., Abilene Radio and Television Company and
the stockholders named therein *
10.32 First Amendment to Deposit Escrow dated as of December 30,
1997, by and among STC Broadcasting, Inc. as Buyer,
stockholders named therein as Sellers, and George Mason Bank,
as escrow agent. (1)
10.33 Deposit Escrow Agreement dated February 3, 1998 by and among
STC Broadcasting of Vermont, as buyer, Tuscaloosa
Broadcasting, Inc., WPTZ Licensee, Inc. and WNNE Licensee,
Inc., as sellers and George Mason Bank as deposit escrow
agent. (1)
10.34 Waiver, dated March 11, 1998, to the Credit Agreement, dated
February 28, 1997, by and among STC Broadcasting, Inc., as
Borrower, NationsBank of Texas, N.A., as Documentation Agent,
The Chase Manhattan Bank, as Administrative and Syndication
Agent, and the lenders party thereto. (1)
10.35 Affiliation Agreement, dated December 16, 1994 between NBC
Television Network and WJAC, Inc., (WJAC-TV) (1)
10.36 Collective Bargaining Agreement, dated October 2, 1997, by and
between WJAC-TV and International Alliance of Theatrical Stage
Employees, Moving Picture Technicians, Artists and Allied
Crafts of the United States of America, TSBE Local 902. (1)
10.37 Collective Bargaining Agreement, dated December 1, 1997, by
and between WTOV-TV and International Brotherhood of
Electrical Workers. (1)
10.38 Management Agreement dated October 1, 1997 between WJAC,
Incorporated and STC Broadcasting, Inc. (1)
10.39 Intercompany Loan Agreement dated October 1, 1997 between
WJAC, Incorporated and STC Broadcasting, Inc. (1)
10.40 Guaranty given as of February 3, 1998 by STC Broadcasting,
Inc as Guarantor to Tuscaloosa Broadcasting, Inc., WPTZ
Licensee, Inc. and WNNE Licensee, Inc. as sellers (1)
10.41 Guaranty given as of February 3, 1998 by Sinclair
Broadcasting Group, Inc. as Guarantor to STC Broadcasting of
Vermont, Inc. as buyer (1)
10.42 Guaranty given as of February 18, 1998 by Hearst-Argyle
Television, Inc., as Guarantor to STC Broadcasting of Vermont,
Inc., STC License Company and STC Broadcasting of Vermont
Subsidiary, Inc. (1)
12 Statement fixed charge ratio (1)
21.1 Subsidiaries of STC Broadcasting, Inc. (1)
27 Financial Data Schedule (1)
99.1 WJAC-Incorporated
Report of Independent Certified Public Accountants
Consolidated Balance Sheet as of September 30, 1997
Consolidated Statement of Operations for the nine months
ended September 30, 1997
Consolidated Statement of Stockholders' Equity for the nine
months ended September 30, 1997
Consolidated Statement of Cash Flows for the nine months ended
September 30, 1997
</TABLE>
84
<PAGE> 85
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Notes to Consolidated Financial Statements (1)
</TABLE>
* Incorporated by reference to the Registration Statement on Form S-1 (File
No. 333-29555) of STC Broadcasting, Inc. as filed with the Securities and
Exchange Commission.
(1) Filed herewith
(2) Management contracts and compensatory plans or arrangements
85
<PAGE> 1
Exhibit 2.5
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement (this "Amendment") is
made and entered into as of December 30, 1997, by and among STC Broadcasting,
Inc., a Delaware corporation ("Purchaser"), Abilene Radio and Television
Company, a Delaware corporation (the "Company"), and William L. Andrews, the
Carol Cagle Trust, the Christine Cagle Testamentary Trust, the Larry Ackers GST
Exempt Trust, the Brandon Ackers Trust, Gary R. Ackers and the Glen Ackers
Trust (collectively, the "Sellers").
RECITALS
WHEREAS, Sellers have agreed to sell, and Purchaser has agreed to
acquire, all of the issued and outstanding capital stock of the Company
pursuant to that certain Stock Purchase Agreement, dated July 8, 1997, by and
among Purchaser, the Company and the Sellers (the "Stock Purchase Agreement");
WHEREAS, Purchaser, the Company and the Sellers desire to amend
certain provisions of the Stock Purchase Agreement; and
WHEREAS, Gary R. Ackers has power and authority to act on behalf of
the Sellers pursuant to the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
AMENDMENT OF AGREEMENT
Section 1.1 Amendment to Section 2.1. The first sentence of
Section 2.1 of the Stock Purchase Agreement is hereby amended to replace
"$8,500,000" with "$7,250,000."
Section 1.2 Amendment to Section 5.5. Section 5.5 of the Stock
Purchase Agreement is hereby amended to add thereto the following at the end of
such Section:
"Sellers acknowledge that under the presently effective rules and
regulations of the FCC
<PAGE> 2
a waiver is necessary to permit the continued common ownership of
KRBC-TV, Abilene, Texas, and KACB-TV, San Angelo, Texas. In order to
facilitate the grant of the applications by the FCC, Purchaser agrees
to withdraw its "Request for Continued Satellite Exemption" and
to replace it with a "Request for Temporary Waiver of the Duopoly
Rule" within five days of the date of the First Amendment to Stock
Purchase Agreement. Sellers shall have no liability to Purchaser in
the event that the FCC requires Purchaser to divest of either station
subsequent to the Closing because of the FCC's refusal to extend this
temporary waiver."
Section 1.3 Amendment to Article V. Article V of the Stock
Purchase Agreement is hereby amended to add thereto the following sections as
follows:
"5.16 Purchase Price. Except as set forth herein,
Purchaser agrees not to request or demand from Sellers prior to or at
Closing any reduction in the $7,250,000 portion of the Unadjusted
Purchase Price.
5.17 Advisor. On or before February 1, 1998, Sellers
agree to hire a consultant (the "Consultant") to serve as an advisor
with respect to the management of KRBC-TV, Abilene, Texas, and
KACB-TV, San Angelo, Texas. The Consultant shall be selected by
Purchaser, and Purchaser shall be obligated to pay the Consultant's
compensation. The terms of the Consultant's engagement with the
Company shall be determined by Purchaser. Sellers shall have the
option, if they so wish, to name the Consultant as general manager of
KRBC-TV, Abilene, Texas, and KACB-TV, San Angelo, Texas."
Section 1.4 Amendment to Section 9.1(b). Section 9.1(b) of the
Stock Purchase Agreement is hereby amended to read in its entirety as follows:
"(b) By either Purchaser or Sellers if the Closing shall
not have occurred on or before March 31, 1997; provided, that the
right to terminate this Agreement pursuant to this Section 9.1(b)
shall not be available to any party whose delay or failure to fulfill
any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date;"
2
<PAGE> 3
ARTICLE II
MISCELLANEOUS
Section 2.1 Defined Terms. All capitalized terms used and not
defined herein shall have the meanings ascribed to such terms in the Stock
Purchase Agreement as hereby amended.
Section 2.2 Effect of Amendment. Except as specifically provided
herein, the Stock Purchase Agreement is in all respects ratified and confirmed.
All of the terms, conditions and provisions of the Stock Purchase Agreement as
hereby amended shall be and remain in full force and effect.
Section 2.3 Entire Agreement. This Amendment and the unaltered
portions of the Stock Purchase Agreement, together with the Schedules and
Exhibits attached to the Stock Purchase Agreement, represent the entire
agreement and understanding of the parties to the Stock Purchase Agreement with
respect to the transactions contemplated herein and therein, and no
representations, warranties or covenants have been made in connection with this
Amendment or the Stock Purchase Agreement, other than those expressly set forth
herein and therein, or in certificates delivered in accordance herewith or
therewith. This Amendment and the unaltered portions of the Stock Purchase
Agreement supersedes all prior negotiations, discussions, correspondence,
communications, understandings and agreements among the parties relating to the
subject matter of this Amendment and the Stock Purchase Agreement and such
agreements and all prior drafts of this Amendment and the Stock Purchase
Agreement and such other agreements are merged into this Amendment and the
unaltered portions of the Stock Purchase Agreement.
Section 2.4 Amendments. This Amendment and the Stock Purchase
Agreement as hereby amended may be amended or supplemented at any time by
additional written agreements signed by the parties hereto.
Section 2.5 Governing Law. This Amendment shall be governed by
and construed in accordance with the laws of the State of Texas, without giving
effect to choice of laws principles.
Section 2.6 Sellers' Representative. Gary R. Ackers has all
requisite power and authority to execute and deliver this Amendment on behalf
of all of the Sellers pursuant to Section 10.19 of the Stock Purchase
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE> 4
This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall be
considered one and the same agreement.
STC BROADCASTING, INC.
By: /s/ David A. Fitz
----------------------------------
Name: David A. Fitz
Title: Senior Vice President
ABILENE RADIO AND TELEVISION COMPANY
By: /s/ Gary R. Ackers
----------------------------------
Name: Gary R. Ackers
Title: President
SELLERS
By: /s/ Gary R. Ackers
----------------------------------
Gary R. Ackers,
Sellers' Representative
<PAGE> 1
Exhibit 2.6
ASSET PURCHASE AGREEMENT
BY AND AMONG
TUSCALOOSA BROADCASTING, INC.,
WPTZ LICENSEE, INC.,
WNNE LICENSEE, INC.
AS SELLERS
AND
STC BROADCASTING OF VERMONT, INC.
AS BUYER
DATED AS OF FEBRUARY 3, 1998
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS AND REFERENCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2. SALE AND PURCHASE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1. Asset Sale and Purchase of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1.1. FCC Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1.2. Real and Leased Property Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1.3. Tangible Personal Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1.4. Intellectual Property.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1.5. Program Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1.6. Trade-out Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1.7. Broadcast Time Sales Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1.8. Network Affiliation Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1.9. Operating Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1.10. Vehicles.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1.11. Files and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1.12. Auxiliary Facilities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1.13. Permits and Licenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1.14. Goodwill.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1.15. Other Assets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2. Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2.1. Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2.2. Accounts Receivable.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2.3. Personal Property Disposed Of.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2.4. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2.5. Employee Plans and Assets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2.6. Right to Tax Refunds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2.7. Certain Books and Records.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2.8. Third-Party Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2.9. Rights Under this Agreement and the Heritage Agreement. . . . . . . . . . . . . . . . . . . 6
2.2.10. Names. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2.11. Deposit and Prepaid Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2.12. WFFF Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2.13. Miscellaneous Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3. Escrow Deposit.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4. Purchase Price.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5. Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6. Proration Amount.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7. Allocation of Base Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8. Assumption of Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY SELLERS. . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1. Organization and Standing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2. Authorization.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4. Consents and Approvals; No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5. Financial Statements; Undisclosed Liabilities.. . . . . . . . . . . . . . . . . . . . . . . . 12
3.6. Absence of Certain Changes or Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7. Absence of Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.8. Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.9. FCC Matters.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.10. Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.11. Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.12. Station Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.13. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.14. Employee Benefit Plans.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.15. Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.16. Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.17. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.18. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY BUYER. . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.1. Organization and Standing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2. Authorization.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3. Consents and Approvals; No Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4. Availability of Funds.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5. Qualification of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.6. WARN Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7. No Outside Reliance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.8. Interpretation of Certain Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 5. PRE-CLOSING FILINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1. Applications for FCC Consent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2. Hart-Scott-Rodino.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3. Non-Required Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 6. COVENANTS AND AGREEMENTS OF SELLERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1.1. Dispositions; Mergers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1.2. Accounting Principles and Practices. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1.3. Trade-out Agreements.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1.4. Broadcast Time Sales Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1.5. Network Affiliation Agreements and LMAs. . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1.6. Additional Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
-ii-
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6.1.7. Breaches. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1.8. Employee Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1.9. Actions Affecting FCC Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1.10. Programming. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1.11. Encumbrances.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1.12. Transactions With Affiliates.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2.1. Preserve Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2.2. Normal Operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2.3. Maintain FCC Licenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.2.4. Network Affiliation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.2.5. Station Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.2.6. Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.2.7. Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.2.8. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.2.9. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.2.10. Consents.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2.11. Corporate Action.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2.12. Environmental Audit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.2.13. Heritage Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.4. Heritage Acquisition.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 7. COVENANTS AND AGREEMENTS OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.1. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.2. Corporate Action.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.3. Access.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.4. Collection of Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 8. MUTUAL COVENANTS AND UNDERSTANDINGS OF SELLERS AND BUYER. . . . . . . . . . . . . . . . . . 32
8.1. Possession and Control.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2. Risk of Loss.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3. Public Announcements.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.4. Employee Matters.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.5. Disclosure Schedules.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.6. Bulk Sales Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.7. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.8. Preservation of Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.9. TBA Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. . . . . . . . . . . . . . . . . . . . . . . . 36
9.1. Closing Under the Heritage Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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9.2. Representations and Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.3. No Transmission Defects. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.4. Delivery of Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.5. FCC Order. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.6. Hart-Scott-Rodino. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.7. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 10. CONDITIONS PRECEDENT TO OBLIGATION OF SELLERS. . . . . . . . . . . . . . . . . . . . . . . 37
10.1. Closing Under the Heritage Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.2. Representations and Covenants.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.3. Delivery by Buyer.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.4. FCC Order.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.5. Hart-Scott-Rodino.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.6. Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 11. CLOSING; NON-LICENSE TRANSFER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.1. Closing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.2. Non-License Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.3. Time and Place of Non-License Transfer and Closing. . . . . . . . . . . . . . . . . . . . . . 40
11.4. Deliveries by Sellers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.4.1. Agreements and Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.4.2. Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.4.3. Certified Resolutions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.4.4. Officers' Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.4.5. Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.5. Deliveries by Buyer.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.5.1. Purchase Price Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.5.2. Agreements and Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.5.3. Certified Resolutions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.5.4. Officers' Certificate.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 12. SURVIVAL; INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.1. Survival of Representations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.2. Indemnification By Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.3. Indemnification By Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.4. Limitations on Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.5. Conditions of Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.6. Cure of Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 13. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
13.1. Termination by the Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
13.2. Automatic Termination.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
13.3. Effect of Termination.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 14. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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14.1. Default by Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
14.2. Liquidated Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
14.3. Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 15. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.1. Additional Actions, Documents and Information.. . . . . . . . . . . . . . . . . . . . . . . . 47
15.2. Brokers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.3. Expenses and Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.4. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.5. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.6. Benefit and Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.7. Entire Agreement; Amendment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.8. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.9. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.10. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
15.11. Signature in Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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<PAGE> 7
SCHEDULES
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Schedule 2.1.1 FCC Licenses
Schedule 2.1.2 Real Property Interests
Schedule 2.1.3 Tangible Personal Property
Schedule 2.1.5 Program Contracts
Schedule 2.1.6 Trade-out Agreements
Schedule 2.1.8 Network Affiliation Agreements
Schedule 2.1.9 Operating Contracts
Schedule 2.1.10 Vehicles
Schedule 2.2.13 Excluded Assets
Schedule 3.4 Consents
Schedule 3.6 Absence of Certain Changes or Events
Schedule 3.7 Litigation
Schedule 3.8 Encumbrances on Assets
Schedule 3.9 FCC Matters
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Employee Matters
Schedule 3.16 Environmental Matters
Schedule 3.17 Insurance
Schedule 4.5.1 Buyer Stations
Schedule I License Assets
</TABLE>
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<PAGE> 8
EXHIBITS
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EXHIBIT A Form of Bill of Sale and Assignment of Assets
EXHIBIT B Form of Assignment of FCC Licenses
EXHIBIT C Form of Assignment of Contracts and Leases
EXHIBIT D Form of Assumption Agreement
EXHIBIT E Form of TBA Agreement
</TABLE>
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<PAGE> 9
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
this 3rd day of February, 1998, by and among STC BROADCASTING OF VERMONT, INC.,
a Delaware corporation ("Buyer"), TUSCALOOSA BROADCASTING, INC., a Maryland
corporation ("Tuscaloosa"), WPTZ LICENSEE, INC., a Maryland corporation ("WPTZ
Licensee"), and WNNE LICENSEE, INC., a Maryland corporation ("WNNE Licensee")
(Tuscaloosa, WPTZ Licensee and WNNE Licensee, collectively, the "Sellers" and,
individually a "Seller").
WHEREAS, pursuant to an Asset Purchase Agreement dated as of July 16,
1997 (the "Heritage Agreement"), by and among Sinclair Broadcast Group, Inc., a
Maryland corporation ("Sinclair") and certain indirect subsidiaries of Heritage
Media Corporation, a Delaware corporation ("HMC"), Sinclair has agreed to buy,
and such subsidiaries have agreed to sell, certain broadcast stations owned,
controlled or operated by such subsidiaries, including (i) television broadcast
station WPTZ-TV, Channel 5, North Pole, New York ("WPTZ"); (ii) certain assets
and rights relating to television broadcast station WFFF-TV, Channel 44,
Burlington, Vermont ("WFFF"); and (iii) television broadcast station WNNE-TV,
Channel 31, Hartford, Vermont ("WNNE") (WPTZ, WFFF and WNNE each, individually,
a "Station" and, collectively, the "Stations") (such subsidiaries of HMC
transferring assets related to the Stations pursuant to the Heritage Agreement
are referred to herein as the "Heritage Subsidiaries");
WHEREAS, each Seller is a wholly-owned indirect subsidiary of Sinclair,
and Sinclair has assigned to Sellers Sinclair's rights to acquire the Stations,
subject to and in accordance with the terms and conditions of the Heritage
Agreement;
WHEREAS, pursuant to a Transfer Agreement dated as of May 2, 1997, among
William G. Evans (the "Trustee"), HMC, The News Corporation Limited, a South
Australia corporation and Heritage Media Services, Inc., a Iowa corporation and
wholly-owned subsidiary of HMC ("HMSI"), on August 20, 1997, HMSI transferred to
the Trustee to hold in trust for the benefit of HMSI, all of the outstanding
capital stock of HMI Broadcasting Corp., a Delaware corporation and owner of all
of the outstanding capital stock of the Heritage Subsidiaries;
WHEREAS, pursuant to a guaranty given as of the date hereof by Sinclair
to Buyer, Sinclair has guaranteed to Buyer the prompt and complete performance
of the obligations of Sellers arising under this Agreement and the other Seller
Documents;
WHEREAS, Buyer is a wholly-owned indirect subsidiary of STC
Broadcasting, Inc., a Delaware corporation ("STC");
WHEREAS, pursuant to a guaranty given as of the date hereof by STC to
Sellers, STC has guaranteed to Sellers the prompt and complete performance of
the obligations of Buyer arising under this Agreement and the other Buyer
Documents;
<PAGE> 10
WHEREAS, the parties hereto desire to enter into this Agreement to
provide for the sale, assignment and transfer by Sellers to Buyer of the assets
of the Stations, all subject to the terms described in this Agreement; and
WHEREAS, upon the satisfaction of certain conditions set forth herein,
the parties desire to enter into operating agreements pursuant to which Buyer
will commence operating the Stations, subject to compliance with all
requirements of the FCC.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE 1.
DEFINITIONS AND REFERENCES
Capitalized terms used herein without definition shall have the
respective meanings assigned thereto in Annex I attached hereto and incorporated
herein for all purposes of this Agreement (such definitions to be equally
applicable to both the singular and plural forms of the terms defined). Unless
otherwise specified, all references herein to "Articles" or "Sections" are to
Articles or Sections of this Agreement.
ARTICLE 2.
SALE AND PURCHASE OF ASSETS
2.1. ASSET SALE AND PURCHASE OF ASSETS.
Subject to the terms and conditions hereof and in reliance upon the
representations, warranties and agreements contained herein, Sellers shall sell,
assign, transfer, convey and deliver to Buyer free and clear of any Encumbrances
other than Permitted Encumbrances, and Buyer shall purchase, acquire, pay for
and accept from Sellers, all right, title and interest of Sellers in, to and
under all real, personal and mixed assets, rights, benefits and privileges, both
tangible and intangible, owned, leased, used or useful by Sellers in connection
with the business and operations of the Stations (collectively, the "Assets");
but excluding the Excluded Assets described in Section 2.2.
The Assets shall include, without limitation, all right, title and
interest of Sellers in, to and under the following:
2.1.1. FCC LICENSES.
All licenses, permits and other authorizations issued by the FCC to any
Seller or any Heritage Subsidiary for the operation of the Stations (the "FCC
Licenses"), including without limitation those listed in Schedule 2.1.1, and all
applications therefor, together with any renewals, extensions or modifications
thereof and additions thereto.
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<PAGE> 11
2.1.2. REAL AND LEASED PROPERTY INTERESTS.
(a) All the real property owned by any Seller or any Heritage
Subsidiary including, without limitation, all land, fee interests,
easements and other interests of every kind and description in real
property, buildings, structures, fixtures, appurtenances, towers and antennae,
and other improvements thereon owned by any Seller or any Heritage Subsidiary
used or useful in connection with the business and operations of the Stations
("Real Property"), including, without limitation, all of those items listed in
Schedule 2.1.2.
(b) All the real property leasehold interests of any Seller or any
Heritage Subsidiary including, without limitation, leases and subleases of any
land, easements and other real property leasehold interests of every kind and
description in real property, buildings, structures, fixtures, appurtenances,
towers and antennae, and other improvements thereon leased by any Seller or any
Heritage Subsidiary in connection with the business and operations of the
Stations ("Leased Property"), including, without limitation, all of those items
listed in Schedule 2.1.2.
2.1.3. TANGIBLE PERSONAL PROPERTY.
All of the furniture, fixtures, furnishings, machinery, computers,
equipment, inventory, spare parts, supplies, office materials and other tangible
property of every kind and description owned, leased or used by any Seller or
any Heritage Subsidiary in connection with the business and operations of the
Stations, together with any replacements thereof and additions thereto made
before the Closing Date, and less any retirements or dispositions thereof made
before the Closing Date in the Ordinary Course of Business, including, without
limitation, those items which have a book value in excess of Five Thousand
Dollars ($5,000), all of which as of the date of the Heritage Agreement are set
forth and identified in Schedule 2.1.3.
2.1.4. INTELLECTUAL PROPERTY.
All of the service marks, copyrights, franchises, trademarks, trade
names, jingles, slogans, logotypes and other similar intangible assets
maintained, owned, leased or used by any Seller or any Heritage Subsidiary in
connection with the business and operations of the Stations (including any and
all applications, registrations, extensions and renewals relating thereto) (the
"Intellectual Property"), and all of the rights, benefits and privileges
associated therewith including, without limitation, the right to use the call
letters for the Stations.
2.1.5. PROGRAM CONTRACTS.
The program licenses and contracts under which any Seller or Heritage
Subsidiary is authorized to broadcast programs on the Stations (collectively the
"Program Contracts") including, without limitation, (a) all program (cash and
non-cash) licenses and contracts listed on Schedule 2.1.5, and (b) any other
such program contracts that are entered
-3-
<PAGE> 12
into between the date of this Agreement and the Closing Date in accordance with
the terms of this Agreement.
2.1.6. TRADE-OUT AGREEMENTS.
All contracts and agreements (excluding Program Contracts) pursuant to
which any Seller or Heritage Subsidiary has sold, traded or bartered commercial
air time on the Stations in consideration for any property or services in lieu
of or in addition to cash (collectively, the "Trade-out Agreements")
including, without limitation, those set forth and identified in Schedule 2.1.6.
2.1.7. BROADCAST TIME SALES AGREEMENT.
All contracts and agreements pursuant to which any Seller or Heritage
Subsidiary has sold commercial air time on the Stations for cash (collectively
the "Time Sales Agreements").
2.1.8. NETWORK AFFILIATION AGREEMENTS.
All network affiliation agreements or other contracts of the Stations
with any television broadcast network (collectively, the "Network Agreements")
including, without limitation, those listed on Schedule 2.1.8.
2.1.9. OPERATING CONTRACTS.
All other operating contracts and agreements relating to the business or
operations of the Stations, all material such contracts as of the date of the
Heritage Agreement being listed on Schedule 2.1.9 (including, without
limitation, any LMA, all employment agreements and talent contracts, all leases
and subleases relating to the Leased Property, all agreements relating to any
motor vehicles, and all national and local advertising representation agreements
for the Stations), together with all contracts and agreements that are entered
into between the date of the Heritage Agreement and the Closing Date in
accordance with the terms of this Agreement (collectively, the "Operating
Contracts" and together with the Program Contracts, Trade-out Agreements, Time
Sales Agreements and the Network Agreements, the "Station Contracts").
2.1.10. VEHICLES.
All automotive equipment and motor vehicles maintained, owned, leased or
otherwise used by any Seller or any Heritage Subsidiary in connection with the
business and operations of the Stations, including, without limitation, those
set forth and described in Schedule 2.1.10.
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<PAGE> 13
2.1.11. FILES AND RECORDS.
All engineering, business and other books, papers, logs, files and
records pertaining to the business and operations of the Stations, but not the
organizational documents and records described in Section 2.2.7.
2.1.12. AUXILIARY FACILITIES.
All translators, earth stations, and other auxiliary facilities, and all
applications therefor owned, leased or otherwise used or useful by any Seller or
any Heritage Subsidiary in connection with the business and operations of the
Stations.
2.1.13. PERMITS AND LICENSES.
All permits, approvals, orders, authorizations, consents, licenses,
certificates, franchises, exemptions of, or filings or registrations with, any
court or Governmental Authority (other than the FCC) in any jurisdiction, which
have been issued or granted to or are owned or used or useful by any Seller or
any Heritage Subsidiary in connection with the business and operations of the
Stations and all pending applications therefor.
2.1.14. GOODWILL.
The business of the Stations as a "going concern", customer
relationships and goodwill.
2.1.15. OTHER ASSETS.
All other real, personal and mixed assets, rights, benefits and
privileges, both tangible and intangible, acquired by Sellers pursuant to the
Heritage Agreement that are owned, leased, used or useful in connection with the
business and operations of the Stations.
2.2. EXCLUDED ASSETS.
Notwithstanding anything to the contrary in this Agreement, there shall
be excluded from the Assets and retained by Sellers, to the extent in existence
as of the Closing Date, the following assets (collectively, the "Excluded
Assets").
2.2.1. CASH.
All cash, cash equivalents or deposits held by Sellers, all interest
payable in connection with any such cash, cash equivalents or deposits or short
term investments, bank balances and rights in and to bank accounts, marketable
and other securities of Sellers.
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2.2.2. ACCOUNTS RECEIVABLE.
All Accounts Receivable arising out of the business and operations of
the Stations.
2.2.3. PERSONAL PROPERTY DISPOSED OF.
All tangible personal property disposed of or consumed in the Ordinary
Course of Business as permitted by this Agreement.
2.2.4. INSURANCE.
All contracts of insurance and all insurance plans and the assets
thereof.
2.2.5. EMPLOYEE PLANS AND ASSETS.
All Plans, Benefit Arrangements (except for any Station Contracts,
Proration Items or other matters which are specifically assumed by Buyer
pursuant to the terms hereof), Qualified Plans and Welfare Plans and the assets
thereof.
2.2.6. RIGHT TO TAX REFUNDS.
Any and all claims of Sellers with respect to any Tax refunds.
2.2.7. CERTAIN BOOKS AND RECORDS.
All of each Seller's (a) organizational documents, corporate books and
records (including minute books and stock ledgers and records), and originals of
account books of original entry, (b) duplicated copies of any books, records,
accounts, checks, payment records, Tax records (including payroll, unemployment,
real estate and other Tax records) and other similar books, records and
information relating to such Seller's operation of the business of the Stations
prior to the Closing Date, (c) records prepared by or on behalf of such Seller
in connection with the sale of the Stations, and (d) records and documents
relating to any Excluded Assets.
2.2.8. THIRD-PARTY CLAIMS.
All rights and claims of Sellers whether mature, contingent or
otherwise, against third parties relating to the Assets or the Stations, whether
in tort, contract, or otherwise.
2.2.9. RIGHTS UNDER THIS AGREEMENT AND THE HERITAGE AGREEMENT.
All rights of Sellers under or pursuant to this Agreement and the
Heritage Agreement or any other rights in favor of Sellers pursuant to the other
agreements contemplated hereby or thereby.
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2.2.10. NAMES.
All rights to the names "Sinclair Broadcasting", "Heritage Broadcasting"
and "Heritage Media" and any logo or variation thereof and the goodwill
associated therewith.
2.2.11. DEPOSIT AND PREPAID EXPENSES.
All deposits and prepaid expenses of Sellers, provided, however, any
deposit and prepaid expenses shall be included in the Assets conveyed pursuant
hereto to the extent that any Seller receives a credit therefor in the
calculation of the Proration Amount pursuant to Section 2.6.
2.2.12. WFFF LICENSES.
All licenses, permits and other authorizations issued by the FCC for the
operation of WFFF (all of such licenses, permits and authorizations being issued
to Champlain Valley Telecasting).
2.2.13. MISCELLANEOUS EXCLUDED ASSETS.
The assets listed and identified on Schedule 2.2.13.
2.3. ESCROW DEPOSIT.
For and in partial consideration of the execution and delivery of this
Agreement, simultaneously with the execution and delivery of this Agreement,
Buyer is depositing in escrow with the Deposit Escrow Agent an original,
irrevocable letter of credit (the "Letter of Credit") issued for the benefit of
Sellers and the Deposit Escrow Agent by The Chase Manhattan Bank for an amount
equal to SEVEN MILLION TWO HUNDRED THOUSAND DOLLARS ($7,200,000) (the
"Deposit"), such Letter of Credit to be held in accordance with the terms and
conditions of the Deposit Escrow Agreement. Buyer and Sellers shall cause the
Letter of Credit to be returned to Buyer on the Transfer Date.
2.4. PURCHASE PRICE.
For and in consideration of the conveyances and assignments of the
Assets described herein and in addition to the assumption of Liabilities as set
forth in Section 2.8, Buyer agrees to pay to Sellers, and Sellers agree to
accept from Buyer, an amount equal to SEVENTY TWO MILLION DOLLARS ($72,000,000)
(the "Base Purchase Price"), plus or minus (as the case may be) the Proration
Amount (collectively, the "Purchase Price").
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2.5. PAYMENT OF PURCHASE PRICE.
2.5.1. At the Non-License Transfer pursuant to Section 11.2,
Buyer shall pay to Sellers by wire transfer of immediately available funds to an
account which will be identified by Sellers not less than two (2) days prior to
the Non-License Transfer Date, an amount equal to SEVENTY MILLION DOLLARS
($70,000,000) of the Base Purchase Price (plus or minus, as the case may be, the
Proration Amount).
2.5.2. The Purchase Price (less any amounts paid to Sellers at
a Non-License Transfer) shall be payable to Sellers at the Closing by wire
transfer of immediately available federal funds to an account which will be
identified by Sellers not less than two (2) days prior to the Closing Date.
2.6. PRORATION AMOUNT.
2.6.1. At least five (5) days prior to the Transfer Date,
Sellers shall make a good faith estimate of the adjustments to the Base Purchase
Price customary in television broadcast station transactions for Proration Items
(the "Proration Amount") to reflect that all Proration Items of the Stations
shall be apportioned between Buyer and Sellers in accordance with the principle
that Sellers shall receive the benefit of all revenues, refunds, deposits (other
than deposits for Program Contracts which shall be prorated based on the
percentage of the term that the film or program was aired on the Stations before
the Transfer Date and the percentage available to be aired on and after the
Transfer Date) and prepaid expenses, and shall be responsible for all expenses,
costs and liabilities allocable to the conduct of the businesses or operations
of the Stations for the period prior to the Transfer Date, and Buyer shall
receive the benefit of all revenues, refunds, deposits and prepaid expenses, and
shall be responsible for all expenses, costs and liabilities allocable to the
conduct of the businesses or operations of the Stations from and after the
Transfer Date; provided, however, that there shall be no adjustment or proration
for any negative or positive net trade balance except to the extent that the
negative trade balance (i.e., the amount by which the value of goods or services
to be received is less than the value of any advertising time remaining to be
run) for any Station exceeds Fifty Thousand Dollars ($50,000) as of the Transfer
Date; provided, further, that if there shall be a Non-License Transfer, then
prorations and adjustments for Proration Items related to the License Assets
shall be made pursuant to this Section 2.6 as of the Closing Date.
Determinations pursuant to this Section 2.6.1 shall be made in accordance with
generally accepted accounting principles consistently applied for the period
prior to the Non-License Transfer Date or the Closing Date, as applicable.
2.6.2. Within ninety (90) days after the Transfer Date, Buyer
shall deliver to Sellers in writing and in reasonable detail a good faith final
determination of the Proration Amount determined as of the Transfer Date under
Section 2.6.1 ("Final Proration Amount"). Sellers shall assist Buyer in making
such determination, and Buyer shall provide Sellers with reasonable access to
the properties, books and records relating to the Stations for the purpose of
determining the Final Proration Amount. Sellers shall have the right to review
the computations
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and workpapers used in connection with Buyer's preparation of the Final
Proration Amount. If Sellers disagree with the amount of the Final Proration
Amount determined by Buyer, Sellers shall so notify Buyer in writing within
thirty (30) days after the date of receipt of Buyer's Final Proration Amount,
specifying in detail any point of disagreement; provided, however, that if
Sellers fail to notify Buyer in writing of Sellers' disagreement within such
thirty (30) day period, Buyer's determination of the Final Proration Amount
shall be final, conclusive and binding on Sellers and Buyer. After the receipt
of any notice of disagreement, Buyer and Sellers shall negotiate in good faith
to resolve any disagreements regarding the Final Proration Amount. If any such
disagreement cannot be resolved by Sellers and Buyer within thirty (30) days
after Buyer has received notice from Sellers of the existence of such
disagreement, Buyer and Sellers shall jointly select a nationally recognized
independent public accounting firm (the "Accounting Firm"), to review Buyer's
determination of the Final Proration Amount and to resolve as soon as possible
all points of disagreement raised by Sellers. All determinations made by the
Accounting Firm with respect to the Final Proration Amount shall be final,
conclusive and binding on Buyer and Sellers. The fees and expenses of the
Accounting Firm incurred in connection with any such determination shall be
shared one-half by Buyer and one-half by Sellers.
If the Final Proration Amount is such that Buyer's payment of the
Proration Amount was an underpayment to Sellers, then Buyer shall pay such
underpayment amount to Sellers in cash, within two (2) business days following
the final determination of the Final Proration Amount. If the Final Proration
Amount is such that Buyer's payment of the Proration Amount was an overpayment
to Sellers, then Sellers shall pay such overpayment amount to Buyer in cash
within two (2) business days following the final determination of the Final
Proration Amount. Any amounts paid pursuant to this Section 2.6.2 shall be by
wire transfer of immediately available funds for credit to the recipient at a
bank account identified by such recipient in writing.
Buyer and Sellers agree that prior to the date of the final
determination of the Final Proration Amount pursuant to this Section 2.6.2 (by
the Accounting Firm or otherwise), neither party will destroy any records
pertaining to, or necessary for, the final determination of the Final Proration
Amount.
Each Seller hereby appoints Sinclair as its attorney-in-fact with power
and authority to act for and on behalf of each Seller in connection with all
matters arising under this Section 2.6. Buyer shall be entitled to rely on
such appointment and treat Sinclair as the duly appointed attorney-in-fact of
each Seller.
2.7. ALLOCATION OF BASE PURCHASE PRICE.
Each party hereto represents, warrants, covenants and agrees with each
other party hereto that the Base Purchase Price shall be allocated among the
classes of Assets for each Station as agreed by the parties within sixty (60)
days after the date hereof; provided, however, that if the parties are unable
to agree on such allocation within such sixty (60) day period, each
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party shall have the right to allocate the classes of Assets for each Station
based upon its own determination. The parties agree, pursuant to Section 1060
of the Code, that the Base Purchase Price shall be allocated in accordance with
this Section 2.7, and that all Tax returns and reports shall be filed
consistent with such allocation. The parties acknowledge and agree that the
payment of the Purchase Price as contemplated herein does not reflect the
allocation among the classes of Assets for each Station as determined pursuant
to this Section 2.7. Notwithstanding any other provision of this Agreement,
the provisions of this Section 2.7 shall survive the Closing Date without
limitation.
2.8. ASSUMPTION OF LIABILITIES.
2.8.1. At the Non-License Transfer, Buyer shall assume, pay,
perform, discharge and indemnify and hold Sellers harmless from and against (a)
all Liabilities arising out of events occurring on or after the Non-License
Transfer Date related to the businesses or operations of the Stations by Buyer
or Buyer's ownership of the Non-License Assets, (b) all Liabilities arising on
or after the Non-License Transfer Date under the Station Contracts (including,
without limitation, Trade-out Agreements) pursuant to their terms (except for
Liabilities for any breaches thereunder by any Seller occurring prior to the
Non-License Transfer Date), (c) all Liabilities for which there is a downward
adjustment to the Base Purchase Price in connection with the calculation of the
Proration Amount, and (d) all Liabilities to employees of the Stations to be
assumed by Buyer in accordance with Section 8.4 hereof.
2.8.2. To the extent not assumed by Buyer at the Non-License
Transfer, at the Closing, Buyer shall assume, pay, perform, discharge and
indemnify and hold Sellers harmless from and against (a) all Liabilities
arising out of events occurring on or after the Closing Date related to the
businesses or operations of the Stations or Buyer's ownership of the Assets,
(b) all Liabilities arising out of events occurring on or after the Closing
Date with respect to the FCC Licenses, (c) all Liabilities arising on or after
the Closing Date under the Station Contracts (including, without limitation,
Trade-out Agreements) pursuant to their terms (except for Liabilities for any
breaches thereunder by any Seller occurring prior to the Closing Date), (d) all
Liabilities for which there is a downward adjustment to the Base Purchase Price
in connection with the calculation of the Proration Amount, and (e) all
Liabilities to employees of the Stations to be assumed by Buyer in accordance
with Section 8.4 hereof.
2.8.3. Except for the Assumed Liabilities, Buyer assumes no
other Liabilities of any kind or description including, without limitation, any
obligations under or pursuant to the Heritage Agreement.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES BY SELLERS
Each Seller, jointly and severally with the other Sellers, represents
and warrants to Buyer as follows:
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3.1. ORGANIZATION AND STANDING.
Each Seller is duly organized, validly existing and in good standing
under the laws of the state of its organization and will at Closing be duly
qualified to do business and is in good standing in any jurisdiction where such
qualification is necessary in order to consummate the transactions contemplated
under this Agreement, except for those jurisdictions where the failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect. Prior to the Transfer Date, each Seller will have the corporate power
and authority to own, lease and otherwise to hold and operate such Seller's
Assets, and to carry on the business of the Stations as now conducted. Each
Seller has the corporate power and authority to enter into and perform the
terms of this Agreement, the other Seller Documents and the transactions
contemplated hereby and thereby.
3.2. AUTHORIZATION.
The execution, delivery and performance of this Agreement and of the
other Seller Documents to which it is a party, and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action (none of which actions has been
modified or rescinded and all of which actions are in full force and effect).
This Agreement and the Deposit Escrow Agreement constitute, and upon execution
and delivery each other Seller Document to which it is a party will constitute,
valid and binding agreements and obligations of each Seller, enforceable
against it in accordance with their respective terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general applicability relating to or affecting creditors' rights
generally and by the application of general principles of equity.
3.3. COMPLIANCE WITH LAWS.
To the knowledge of Sellers and the Heritage Subsidiaries, Sellers and
the Heritage Subsidiaries are in material compliance with all Laws applicable
to the Assets and to the business and operations of the Stations. The Heritage
Subsidiaries have obtained and hold (and Sellers will obtain and hold prior to
the Transfer Date) all material permits, licenses and approvals (none of which
has been modified or rescinded and all of which are in full force and effect)
from all Governmental Authorities necessary in order to conduct the operations
of the Stations as presently conducted.
3.4. CONSENTS AND APPROVALS; NO CONFLICTS.
3.4.1. The execution and delivery of this Agreement, and the
performance of the transactions contemplated herein by Sellers, will not require
any consent, approval, authorization or other action by, or filing with or
notification to, any Person or Governmental Authority, except as follows: (a)
filings required under Hart-Scott-Rodino, (b) consents to the assignment of the
FCC Licenses to Buyer by the FCC, (c) filings, if any, with respect to real
estate transfer taxes, (d) filings with the Securities and Exchange Commission,
and (e) certain of
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the Station Contracts may be assigned only with the consent of third parties,
as specified in Schedule 3.4.
3.4.2. Assuming all consents, approvals, authorizations and
other actions described in Section 3.4.1 have been obtained and all filings and
notifications described in Section 3.4.1 have been made, the execution,
delivery and performance of this Agreement and the other Seller Documents by
each Seller do not and will not (a) conflict with or violate in any material
respect any Law applicable to such Seller, the Assets or Stations or by which
any of the Assets or Stations is subject or affected, (b) conflict with or
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) of any Station Contract or
other material agreement to which such Seller is a party or by which such
Seller is bound or to which any of the Assets or Stations is subject or
affected, (c) result in the creation of any Encumbrance upon the Assets, or (d)
conflict with or violate the organizational documents of such Seller.
3.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
3.5.1. Seller has provided to Buyer an unaudited balance sheet
of the Stations as of December 31, 1997 (the "Balance Sheet"), and an unaudited
statement of income and operating cash flows for the Stations for the twelve
(12) month period ending December 31, 1997. The financial statements referred
to in this Section 3.5.1 (a) present fairly in all material respects the
financial condition of the Stations as of the date and the results of
operations and operating cash flows for the period indicated, and (b) have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except that the financial statements referred to in this
Section 3.5.1 do not contain all footnotes and cash flow information from
investing and financing activities required under generally accepted accounting
principles and are subject to customary year-end adjustments).
3.5.2. There exist no Liabilities of the Stations relating to,
or arising out of, the business or operations of the Stations, contingent or
absolute, matured or unmatured, known or unknown, except (a) as reflected on
the Balance Sheet and (b) for Liabilities that (i) were incurred after December
31, 1997 (the "Current Balance Sheet Date") in the Ordinary Course of Business,
or (ii) were not required to be reflected on the Balance Sheet in accordance
with generally accepted accounting principles applied on a consistent basis.
3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth and described in Schedule 3.6, since the Current
Balance Sheet Date, there has been no Material Adverse Effect. Since the
Current Balance Sheet Date, the business of the Stations has been conducted in
the Ordinary Course of Business, and neither any Seller nor any Heritage
Subsidiary has (a) incurred any extraordinary loss of, or injury to, any of the
Assets as the result of any fire, explosion, flood, windstorm, earthquake,
labor trouble, riot, accident, act of God or public enemy or armed forces, or
other casualty; (b) incurred, or become subject to, any Liability, except
current Liabilities incurred in the Ordinary Course of
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Business; (c) discharged or satisfied any Encumbrance or paid any Liability
other than current Liabilities shown in the Balance Sheet, current Liabilities
incurred since the Current Balance Sheet Date in the Ordinary Course of
Business, and Liabilities (including, without limitation, partial and complete
prepayments) arising under any credit or loan agreement between any Seller and
its lenders; (d) mortgaged, pledged or subjected to any Encumbrance any of the
Assets (except for Permitted Encumbrances); (e) made any material change in any
method of accounting or accounting practice; (f) sold, leased, assigned or
otherwise transferred any of the material Assets other than obsolete Assets
which have been replaced by suitable replacements; (g) made any material
increase in compensation or benefits payable to any employee other than in the
Ordinary Course of Business; or (h) made any agreement to do any of the
foregoing.
3.7. ABSENCE OF LITIGATION.
Except as set forth on Schedule 3.7, as of the date of the Heritage
Agreement, there is no material or, to the knowledge of Sellers and the
Heritage Subsidiaries, immaterial action, suit, investigation, claim,
arbitration, litigation or similar proceeding, nor any order, decree or
judgment pending or, to the knowledge of Sellers and the Heritage Subsidiaries,
threatened against any Seller, any Heritage Subsidiary, the Assets or Stations
before any Governmental Authority.
3.8. ASSETS.
Except for the Excluded Assets, the Assets include all of the assets or
property used or useful in the businesses of the Stations as presently operated
and all of the assets or property acquired by Sellers under the Heritage
Agreement. Except for leased or licensed Assets, the Heritage Subsidiaries are
(and Sellers will be prior to the Transfer Date) the owner of, and have (and
Sellers will have prior to the Transfer Date) good title to, the Assets free
and clear of any Encumbrances, except for Permitted Encumbrances (including,
without limitation, those items set forth on Schedule 3.8). At the Non-License
Transfer and the Closing, Buyer shall acquire good title to, and all right,
title and interest in and to the Assets being transferred at the Non-License
Transfer and the Closing, respectively, free and clear of all Encumbrances,
except for the Permitted Encumbrances.
3.9. FCC MATTERS.
The Heritage Subsidiaries hold (and Sellers will hold prior to the
Transfer Date) the FCC Licenses listed as held by the Heritage Subsidiaries on
Schedule 2.1.1. Such FCC Licenses constitute all of the licenses, permits and
authorizations from the FCC which have been issued to the Heritage Subsidiaries
or the Sellers that are required for the business and operations of the
Stations. Except as set forth on Schedule 3.9, such FCC Licenses are valid and
in full force and effect through the dates set forth on Schedule 2.1.1,
unimpaired by any condition, other than as set forth in the FCC Licenses.
Except as set forth on Schedule 3.9, no application, action or proceeding is
pending for the renewal or modification of any of the FCC Licenses, and, except
for actions or proceedings affecting television broadcast stations generally,
no
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application, complaint, action or proceeding is pending or, to the knowledge of
Sellers and the Heritage Subsidiaries, threatened that may result in the (a)
the revocation, modification, non-renewal or suspension of any of the FCC
Licenses, or (b) the issuance of a cease-and-desist order. Except as set
forth in Schedule 3.9, no Seller or Heritage Subsidiary has knowledge of any
facts, conditions or events relating to any Seller, any Heritage Subsidiary or
the Stations that would reasonably be expected to cause the FCC to revoke any
FCC License or not to grant any pending applications for renewal of the FCC
Licenses or to deny the assignment of the FCC Licenses to a qualified Buyer as
provided for in this Agreement.
3.10. REAL PROPERTY.
3.10.1. The Heritage Subsidiaries have (and Sellers will have
prior to the Transfer Date) good and marketable fee simple title to all fee
estates included in the Real Property and good title to all other owned Real
Property, in each case free and clear of all Encumbrances, except for Permitted
Encumbrances.
3.10.2. The Heritage Subsidiaries have (and Sellers will have
prior to the Transfer Date) a valid leasehold interest in all Leased Property
listed as leased by the Heritage Subsidiaries or Sellers in Schedule 2.1.2.
Schedule 2.1.2 lists all leases and subleases pursuant to which any of the
Leased Property is leased by the Heritage Subsidiaries and Sellers in
connection with the business and operations of the Stations. The Heritage
Subsidiaries are (and Sellers will be prior to the Transfer Date) the owner and
holder of all the Leased Property purported to be granted by such leases and
subleases. Each such lease and sublease is valid as to the lessee and
sublessee thereunder and, to the knowledge of Sellers and the Heritage
Subsidiaries, valid as to any other party thereto, and is in full force and
effect and, to the knowledge of Sellers and the Heritage Subsidiaries,
constitutes a legal and binding obligation of, and is legally enforceable
against the lessee or sublessee thereunder and each other party thereto and
grants the leasehold interest it purports to grant, including any rights to
nondisturbance and peaceful and quiet enjoyment that may be contained therein.
The lessees and sublessees are, and to the knowledge of Sellers and the
Heritage Subsidiaries all other parties are, in compliance in all material
respects with the provisions of such leases and subleases.
3.10.3. The Real Property and the Leased Property listed in
Schedule 2.1.2 constitute all of the real property owned, leased or used by
Sellers or the Heritage Subsidiaries in the business and operations of the
Stations which is material to the business and operations of the Stations.
3.10.4. No portion of the Real Property or any building,
structure, fixture or improvement thereon is the subject of, or affected by,
any condemnation, eminent domain or inverse condemnation proceeding currently
instituted or pending or, to the knowledge of Sellers and the Heritage
Subsidiaries, threatened. To the knowledge of Sellers and the Heritage
Subsidiaries and to the extent that such documents are in the possession of
Sellers or a Heritage Subsidiary, Sellers have delivered to Buyer true, correct
and complete copies of the following documents with respect to the Real
Property and Leased Property: (a) deeds, by which the current owner has
received a fee interest in any of the Real Property; (b) leases for all of the
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Leased Property; (c) title insurance policies or commitments; (d) surveys; and
(e) inspection reports or other instruments or reports, including, without
limitation, any phase I or phase II environmental reports or other similar
environmental reports, surveys or assessments (including any and all amendments
and other modifications of such instruments).
3.11. INTELLECTUAL PROPERTY.
The Heritage Subsidiaries possess (and Sellers will possess prior to
the Transfer Date) adequate rights, licenses and authority to use all
Intellectual Property necessary to conduct the business of the Stations as
presently conducted. The Heritage Subsidiaries have (and Sellers will have
prior to the Transfer Date) good title to all Intellectual Property that the
Heritage Subsidiaries or Sellers own in connection with the business and
operations of the Stations, free and clear of any Encumbrances, except for
Permitted Encumbrances. No Heritage Subsidiary is (and no Seller will be as of
the Transfer Date) obligated to pay any royalty or other fees to anyone with
respect to the Intellectual Property. Neither Seller nor any Heritage
Subsidiary has received any written notice to the effect that any service
rendered by any Seller or any Heritage Subsidiary relating to the business of
the Stations may infringe, or that any Seller or any Heritage Subsidiary is
otherwise infringing, on any Intellectual Property right or other legally
protectable right of another. No director, officer or employee of any Seller
or any Heritage Subsidiary has any interest in any Intellectual Property.
3.12. STATION CONTRACTS.
Complete and correct copies of the Station Contracts set forth in
Schedules 2.1.5, 2.1.6, 2.1.8 and 2.1.9 (which schedules, to Sellers' knowledge
are and which have been represented to Sellers by the Heritage Subsidiaries
making such representations to be, true and correct in all material respects)
have been made available to Buyer and (a) each such material Station Contract
and, to the knowledge of Sellers and the Heritage Subsidiaries, each such
immaterial Station Contract, is in full force and effect and constitutes a
legal, valid and binding obligation of the owner of the Station that is a party
thereto, and, to the knowledge of Sellers and the Heritage Subsidiaries, of
each other party thereto; (b) no owner of a Station is in breach or default in
any material respect of the terms of any Station Contract; (c) none of the
material rights of the owner of a Station under any such Station Contract will
be subject to termination, nor will a default occur, as a result of the
consummation of the transactions contemplated hereby, except to the extent that
failure to obtain the prior consent to assignment thereof of any party thereto
shall or could be interpreted to constitute a termination or modification of or
a default under any such Station Contract; and (d) to the knowledge of Sellers
and the Heritage Subsidiaries, no other party to any such Station Contract is
in breach or default in any material respect of the terms thereunder.
3.13. TAXES.
The Heritage Subsidiaries have (or, in the case of returns becoming due
after the date hereof and on or before the Transfer Date, the Heritage
Subsidiaries or Sellers will have
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prior to the Transfer Date) duly filed all material Seller Tax Returns required
to be filed by them on or before the Transfer Date with respect to all material
applicable Taxes. In the case of any Seller Tax Returns which receive an
extension for their date of filing, such Seller Tax Returns will be considered
due on, and not considered required to be filed before, the extended due date.
To the knowledge of Sellers and the Heritage Subsidiaries, all Seller Tax
Returns are (or, in the case of returns becoming due after the date hereof and
on or before the Transfer Date, will be) true and complete in all material
respects. The Heritage Subsidiaries or Sellers have: (a) paid all Taxes due to
any Governmental Authority as indicated on the Seller Tax Returns; or (b)
established (or, in the case of amounts becoming due after the date hereof,
prior to the Transfer Date will have established) adequate reserves (in
conformity with generally accepted accounting principles consistently applied)
for the payment of such Taxes.
3.14. EMPLOYEE BENEFIT PLANS.
3.14.1. Schedule 3.14 lists all Plans and Benefit
Arrangements (exclusive of severance arrangements and retention agreements)
maintained by or contributed to for the benefit of the employees of the
Stations (collectively, the "Benefit Plans"). Each Benefit Plan has been
maintained in material compliance with its terms and with ERISA, the Code and
other applicable Laws.
3.14.2. Schedule 3.14 sets forth a list of all Qualified
Plans maintained by or contributed to for the benefit of the employees of the
Stations. All such Qualified Plans and any related trust agreements or annuity
agreements (or any other funding document) have been maintained in material
compliance with ERISA and the Code (including, without limitation, the
requirements for tax qualification described in Section 401 thereof), other
than any Multiemployer Plan. To the knowledge of Sellers and the Heritage
Subsidiaries, any trusts established under such Plans are exempt from federal
income taxes under Section 501(a) of the Code.
3.14.3. Schedule 3.14 lists all funded Welfare Plans that
provide benefits to current or former employees of the Stations or their
beneficiaries. To the knowledge of Sellers, the funding under each such
Welfare Plan does not exceed and has not exceeded the limitations under
Sections 419A(b) and 419A(c) of the Code. To the knowledge of Sellers and the
Heritage Subsidiaries, no Seller Party is subject to taxation on the income of
any such Welfare Plan's welfare benefit fund (as such term is defined in
Section 419(e) of the Code) under Section 419A(g) of the Code.
3.14.4. There are no post-retirement medical, life insurance
or other benefits promised, provided or otherwise due now or in the future to
current, former or retired employees of the Stations.
3.14.5. To the knowledge of Sellers and the Heritage
Subsidiaries, except as set forth in Schedule 3.14, the Seller Parties have (a)
filed or caused to be filed all returns and reports on the Plans that they are
required to file and (b) paid or made adequate provision for all fees,
interest, penalties, assessments or deficiencies that have become due pursuant
to those
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returns or reports or pursuant to any assessment or adjustment that has been
made relating to those returns or reports. All other fees, interest, penalties
and assessments that are payable by or for the Seller Parties have been timely
reported, fully paid and discharged. There are no unpaid fees, penalties,
interest or assessments due from any Seller Party or from any other person that
are or could become an Encumbrance on any of the Assets or could otherwise
adversely affect the businesses of the Stations or the Assets. To the
knowledge of Sellers and the Heritage Subsidiaries, the Seller Parties have
collected or withheld all amounts that are required to be collected or withheld
by them to discharge their obligations, and all of those amounts have been paid
to the appropriate Governmental Authority or set aside in appropriate accounts
for future payment when due. Sellers have furnished to Buyer true and complete
copies of all documents setting forth the terms and funding of each Plan.
3.14.6. Except as set forth in Schedule 3.14, neither any
Seller Party nor any ERISA Affiliate has ever sponsored or maintained, had any
obligation to sponsor or maintain, or had any liability (whether actual or
contingent, with respect to any of its assets or otherwise) with respect to any
Plan subject to Section 302 of ERISA or Section 412 of the Code or Title IV of
ERISA (including any Multiemployer Plan). Neither any Seller Party nor any
ERISA Affiliate (since January 1, 1989) has terminated or withdrawn from or
sought a funding waiver with respect to any plan subject to Title IV of ERISA,
and no facts exist that could reasonably be expected to cause such actions in
the future; no accumulated funding deficiency (as defined in Code Section 412),
whether or not waived, exists with respect to any such plan; no reportable
event (as defined in ERISA Section 4043) has occurred with respect to any such
plan (other than events for which reporting is waived); all costs of any such
plans have been provided for on the basis of consistent methods in accordance
with sound actuarial assumptions and practices, and the assets of each such
plan, as of its last valuation date, exceeded its "Benefit Liabilities" (as
defined in ERISA Section 4001(a)(16)); and, since the last valuation date for
each such plan, no such plan has been amended or changed to increase the
amounts of benefits thereunder and, to the knowledge of Sellers and the
Heritage Subsidiaries, there has been no event that would reduce the excess of
assets over benefit liabilities; and except as set forth in Schedule 3.14,
neither any Seller Party nor any ERISA Affiliate has ever made or been
obligated to make, or reimbursed or been obligated to reimburse another
employer for, contributions to any Multiemployer Plan.
3.14.7. No claims or lawsuits are pending or, to the
knowledge of Sellers and the Heritage Subsidiaries, threatened by, against, or
relating to any Benefit Plan. To the knowledge of Sellers and the Heritage
Subsidiaries, the Benefit Plans are not presently under audit or examination
(nor has notice been received of a potential audit or examination) by the IRS,
the Department of Labor, or any other governmental agency or entity and no
matters are pending with respect to any Qualified Plan under the IRS's
Voluntary Compliance Resolution program, its Closing Agreement Program, or
other similar programs.
3.14.8. With respect to each Plan, there has occurred no
non-exempt "prohibited transaction" (within the meaning of Section 4975 of the
Code) or transaction prohibited by Section 406 of ERISA or breach of any
fiduciary duty described in Section 404 of ERISA that would, if successful,
result in any liability for any of the Seller Parties.
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3.14.9. No Seller Party has any liability (whether actual,
contingent, with respect to any of its Assets or otherwise) with respect to any
employee benefit plan that is not a Benefit Plan (exclusive of severance
arrangements and retention agreements) or with respect to any employee benefit
plan sponsored or maintained (or which has been or should have been sponsored
or maintained) by any ERISA Affiliate.
3.14.10. All group health plans of the Seller Parties and the
ERISA Affiliates covering any current or former employees of the Stations have
been operated in material compliance with the requirements of Sections 4980B
(and its predecessor) and 5000 of the Code, and the Seller Parties have
provided, or will have provided before the Transfer Date, to individuals
entitled thereto all required notices and coverage pursuant to Section 4980B
with respect to any "qualifying event" (as defined therein) occurring before or
on the Transfer Date.
3.15. LABOR RELATIONS.
Sellers have made available to Buyer a true and complete list of all
employees of the Heritage Subsidiaries and Sellers engaged in the business or
operations of the Stations as of the date set forth on the list, together with
such employee's position, salary and date of hire. Schedule 3.15 lists all
written employment contracts with any such employees and all written
agreements, plans, arrangements, commitments and understandings pursuant to
which any of the Seller Parties have severance obligations or retention
obligations with respect to such employees. No labor union or other collective
bargaining unit represents or, to the knowledge of Sellers and the Heritage
Subsidiaries, claims to represent, any of the employees of the Stations. There
are no strikes, work stoppages, grievance proceedings, union organization
efforts, or other controversies pending between any Seller or any Heritage
Subsidiary and any union or collective bargaining unit representing (or, to the
knowledge of Sellers and the Heritage Subsidiaries, claiming to represent) any
employees of the Stations. The Heritage Subsidiaries are (and Sellers will be
as of the Transfer Date) in compliance with all Laws relating to the employment
of employees of the Stations or the workplace of the Stations, including,
without limitation, provisions relating to wages, hours, collective bargaining,
safety and health, work authorization, equal employment opportunity,
immigration and the withholding of income taxes, unemployment compensation,
worker's compensation, employee privacy and right to know and social security
contributions, except for any noncompliance which would not have a Material
Adverse Effect. There are no collective bargaining agreements relating to the
Stations or the business and operations thereof.
3.16. ENVIRONMENTAL MATTERS.
3.16.1. Except as set forth in Schedule 3.16, to the
knowledge of Sellers and the Heritage Subsidiaries (which knowledge is based on
the items set forth on Schedule 3.16), the Heritage Subsidiaries are (and
Sellers will be as of the Transfer Date) in material compliance with, and the
Real Property and all improvements thereon are in material compliance with, all
Environmental Laws.
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3.16.2. Except as set forth in Schedule 3.16, there are no
pending or, to the knowledge of Sellers and the Heritage Subsidiaries,
threatened actions, suits, claims, or other legal proceedings based on (and
neither any Seller nor any of the Heritage Subsidiaries has received any
written notice of any complaint, order, directive, citation, notice of
responsibility, notice of potential responsibility, or information request from
any Governmental Authority arising out of or attributable to): (a) the current
or past presence at any part of the Real Property of Hazardous Materials; (b)
the current or past release or threatened release into the environment from the
Real Property (including, without limitation, into any storm drain, sewer,
septic system or publicly owned treatment works) of any Hazardous Materials;
(c) the off-site disposal of Hazardous Materials originating on or from the
Real Property or the Assets or businesses of the Stations; (d) any facility
operations or procedures of the Stations which do not conform to requirements
of the Environmental Laws; or (e) any violation of Environmental Laws at any
part of the Real Property arising from activities of the Stations involving
Hazardous Materials. To the knowledge of Sellers and the Heritage
Subsidiaries, the Heritage Subsidiaries have been (and Sellers will have been
prior to the Transfer Date) duly issued all material permits, licenses,
certificates and approvals required under any Environmental Law.
3.17. INSURANCE.
Schedule 3.17 contains a true and complete list and brief summary of
all policies of title, property, fire, casualty, liability, life, workmen's
compensation, libel and slander, and other forms of insurance of any kind
relating to the Assets or the business and operations of the Stations. All
such policies: (a) are in full force and effect; (b) are sufficient for
compliance in all material respects with all requirements of Law and of all
material agreements to which any Station owner is a party; and (c) to the
knowledge of Sellers and the Heritage Subsidiaries, are valid, outstanding, and
enforceable policies and the policy holder is not in default in any material
respect thereunder.
3.18. REPORTS.
All material returns, reports and statements that the Stations are
currently required to file with the FCC or any governmental agency have been
timely filed, and all reporting requirements of the FCC and other governmental
authorities having jurisdiction thereof have been complied with by Sellers and
the Heritage Subsidiaries in all material respects. All of such reports,
returns and statements are complete and correct in all material respects as
filed. To the knowledge of Sellers and the Heritage Subsidiaries, all
documents required by the FCC to be deposited by the owners of the Stations in
their public files (as defined in the rules and regulations of the FCC) during
the period of operation of the Stations by the Heritage Subsidiaries and
Sellers have been deposited therein.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES BY BUYER
Buyer represents, warrants and covenants to Sellers as follows:
4.1. ORGANIZATION AND STANDING.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and by the Transfer Date will
be duly qualified to do business as a foreign corporation in the State of New
York and the State of Vermont. Buyer has the full corporate power and
corporate authority to enter into and perform the terms of this Agreement and
the other Buyer Documents and to carry out the transactions contemplated hereby
and thereby.
4.2. AUTHORIZATION.
The execution, delivery and performance of this Agreement and of the
other Buyer Documents, and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
actions of Buyer (none of which actions has been modified or rescinded and all
of which actions are in full force and effect). This Agreement and the Deposit
Escrow Agreement constitute, and upon execution and delivery each such other
Buyer Document will constitute, a valid and binding agreement and obligation of
Buyer, enforceable against Buyer in accordance with its respective terms,
except as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
4.3. CONSENTS AND APPROVALS; NO CONFLICTS.
4.3.1. The execution and delivery of this Agreement, and the
performance of the transactions contemplated herein by Buyer, will not require
any consent, approval, authorization or other action by, or filing with or
notification to, any Person or Governmental Authority, except as follows: (a)
filings required under Hart-Scott-Rodino, (b) approvals of the assignment of
the FCC Licenses to Buyer by the FCC, (c) filings, if any, with respect to real
estate transfer taxes and (d) filings with the Securities and Exchange
Commission.
4.3.2. Assuming all consents, approvals, authorizations and
other actions described in Section 4.3.1 have been obtained and all filings and
notifications described in Section 4.3.1 have been made, the execution,
delivery and performance of this Agreement and the other Buyer Documents by
Buyer do not and will not (a) conflict with or violate any material Law
applicable to Buyer, (b) conflict with or result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become
a default) of any material contract or material agreement to which Buyer is a
party or by which Buyer is bound, or (c) conflict with or violate the
organizational documents of Buyer.
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4.4. AVAILABILITY OF FUNDS.
Buyer will have available on the Non-License Transfer Date and the
Closing Date sufficient funds to enable it to consummate the transactions
contemplated hereby.
4.5. QUALIFICATION OF BUYER.
4.5.1. Except as disclosed in Schedule 4.5.1, Buyer is, and
pending Closing will remain legally, financially and otherwise qualified under
the Communications Act and all rules, regulations and policies of the FCC to
acquire and operate the Stations. There are no facts or proceedings which
would reasonably be expected to disqualify Buyer under the Communications Act
or otherwise from acquiring or operating any of the Stations or would cause the
FCC not to approve the assignment of the FCC Licenses to Buyer. Except as
disclosed in Schedule 4.5.1, Buyer has no knowledge of any fact or circumstance
relating to Buyer or any of Buyer's Affiliates that would reasonably be
expected to (a) cause the filing of any objection to the assignment of the FCC
Licenses to Buyer, or (b) lead to a delay in the processing by the FCC of the
applications for such assignment. Except for existing waivers pertaining to
the Stations, no waiver of any FCC rule or policy is necessary to be obtained
for the grant of the applications for the assignment of the FCC Licenses to
Buyer, nor will processing pursuant to any exception or rule of general
applicability be requested or required in connection with the consummation of
the transactions herein.
4.5.2. As of the date hereof and through the later to occur
of the HSR Filing and the filing of the FCC Applications, except as set forth
on Schedule 4.5.1, neither Buyer nor any Affiliate of Buyer (a) owns, controls
or operates any television or radio station located in the Burlington DMA; (b)
has any direct or indirect interest, including, without limitation, any equity,
debt, security or any other financial interest, whether or not "attributable"
(as defined in the rules and regulations of the FCC), or management interest,
in (i) any television or radio station located in the Burlington DMA, or (ii)
any applicant seeking to construct or acquire, by assignment of license or
transfer of control, any such television or radio station (an "Applicant"); or
(c) is a party to any TBA with a television or radio station located in the
Burlington DMA, or with any Applicant. Buyer acknowledges and agrees that the
representations set forth in this Section 4.5.2 shall take into account and
include (a) the consummation of any proposed or pending acquisition (as of the
date hereof and through the later to occur of the HSR Filing and the filing of
the FCC Applications) of television or radio stations (including the
acquisition of the Stations) by Buyer or any Affiliate of Buyer or any
Applicant, and (b) any TBA or proposed or pending TBA (as of the date hereof
and through the later to occur of the HSR Filing and the filing of the FCC
Applications) to which Buyer or any Affiliate of Buyer is or may become a
party.
4.6. WARN ACT.
Buyer is not planning or contemplating, and has not made or taken, any
decisions or actions concerning the employees of the Stations after the Transfer
Date that would
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require the service of notice under the Worker Adjustment and Retraining Act of
1988, as amended.
4.7. NO OUTSIDE RELIANCE.
Buyer has not relied and is not relying on any statement,
representation or warranty not made in this Agreement, any Schedule
hereto or any certificate to be delivered to Buyer at the Non-License Transfer
or the Closing pursuant to this Agreement. Buyer is not relying on any
projections or other predictions contained or referred to in materials (other
than the Schedules) that have been or may hereafter be provided to Buyer or any
of its Affiliates, agents or representatives, and Sellers make no
representations or warranties with respect to any such projections or other
predictions.
4.8. INTERPRETATION OF CERTAIN PROVISIONS.
Buyer has not relied and is not relying on the specification of any
dollar amount in any representation or warranty made in this Agreement or any
Schedule hereto to indicate that such amounts, or higher or lower amounts, are
or are not material, and agrees not to assert in any dispute or controversy
between the parties hereto that specification of such amounts indicates or is
evidence as to whether or not any obligation, item or matter is or is not
material for purposes of this Agreement and the transactions contemplated
hereby.
ARTICLE 5.
PRE-CLOSING FILINGS
5.1. APPLICATIONS FOR FCC CONSENT.
Within five (5) business days following the execution of this
Agreement, Sellers and Buyer (or any permitted assignee of Buyer under Section
15.6.1) shall jointly file applications for the Stations with the FCC
requesting consent to the assignment of the FCC Licenses for the Stations from
Sellers to Buyer (the "FCC Applications"). Sellers and Buyer will diligently
take, or fully cooperate in the taking of, all necessary and proper steps, and
provide any additional information reasonably requested in order to obtain
promptly the requested consents and approvals of the FCC Applications by the
FCC.
5.2. HART-SCOTT-RODINO.
Within five (5) business days following the execution of this
Agreement, Sellers and Buyer shall complete any filing that may be required
pursuant to Hart-Scott-Rodino (each an "HSR Filing"). Sellers and Buyer shall
diligently take, or fully cooperate in the taking of, all necessary and proper
steps, and provide any additional information reasonably requested in order to
comply with, the requirements of Hart-Scott-Rodino.
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5.3. NON-REQUIRED ACTIONS.
Neither Buyer nor any Seller shall have any obligation to take any
steps pursuant to Section 5.1 or Section 5.2 which would be reasonably expected
to result in the incurrence of a material cost or other liability or which
would require the divestiture of any business or assets of any party hereto or
any Affiliate thereof.
ARTICLE 6.
COVENANTS AND AGREEMENTS OF SELLERS
Each Seller covenants and agrees with Buyer as follows:
6.1. NEGATIVE COVENANTS.
Pending and prior to the Non-License Transfer and the Closing, such
Seller will not, and will use its commercially reasonable efforts to enforce
such rights under the Heritage Agreement to cause the Heritage Subsidiaries not
to, without the prior written consent of Buyer (which consent will not be
unreasonably withheld, delayed or conditioned, except in the case of matters
referred to in Sections 6.1.6(b), 6.1.7, 6.1.9 and 6.1.11, with respect to
which Buyer's consent may be withheld in its sole and absolute discretion), do
or agree to do any of the following insofar as such actions (or failure to act)
relate to the Stations:
6.1.1. DISPOSITIONS; MERGERS.
Sell, assign, lease or otherwise transfer or dispose of any of the
Assets other than at substantially fair market value and in the Ordinary Course
of Business; or merge or consolidate with or into any other entity or enter into
any contracts or agreements relating thereto.
6.1.2. ACCOUNTING PRINCIPLES AND PRACTICES.
Change or modify any accounting principles or practices or any method
of applying such principles or practices.
6.1.3. TRADE-OUT AGREEMENTS.
Enter into or renew any Trade-out Agreement that would be binding on
Buyer after the Non-License Transfer Date or the Closing Date, except in the
Ordinary Course of Business and which requires the provision of broadcast time
having a value of less than (a) Twenty-Five Thousand Dollars ($25,000)
individually, and (b) together with existing Trade-out Agreements still in
effect as of the Non-License Transfer Date or the Closing Date, as the case may
be, Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate as of the
Non-License Transfer Date or the Closing Date, as the case may be.
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6.1.4. BROADCAST TIME SALES AGREEMENTS.
Enter into or renew any Time Sales Agreement except in the Ordinary
Course of Business and which are for cash at prevailing rates for a term not
exceeding twelve (12) months.
6.1.5. NETWORK AFFILIATION AGREEMENTS AND LMAS.
Except for the TBA Agreement, acquire or enter into or renew any LMA or
network affiliation agreement.
6.1.6. ADDITIONAL AGREEMENTS.
(a) Acquire or enter into any new Station Contracts not referred to in
Sections 6.1.3, 6.1.4 or 6.1.5 above, or renew, extend, amend, alter, modify or
otherwise change any existing Station Contract, except in the Ordinary Course
of Business (collectively, "Additional Agreements"); provided, however, such
Seller shall not, and shall use its commercially reasonably efforts to cause
each Seller Party not to, enter into (a) any Program Contract for any Station
which will be binding on Buyer after the Non-License Transfer Date or the
Closing Date, or (b) any other Station Contract requiring payments by a Seller
Party under each Station Contract in excess of Fifty Thousand Dollars
($50,000). For purposes of clause (a) above, each Seller acknowledges that it
shall not be unreasonable for Buyer to withhold its consent to approve of any
Program Contract where Buyer, acting in good faith, has reason to conclude that
it can acquire such programming on better terms.
(b) From and after the Sellers' acquisition of the Stations from the
Heritage Subsidiaries, Sellers shall not, without the prior written consent of
Buyer, acquire or enter into any new Station Contract or renew, extend, amend,
alter, modify or otherwise change any existing Station Contract, which in any
case requires payments by a Seller Party under any such Station Contract in
excess of Twenty-Five Thousand Dollars ($25,000).
6.1.7. BREACHES.
Do or omit to do any act which will cause a material breach of any
Station Contract.
6.1.8. EMPLOYEE MATTERS.
Enter into or become subject to any employment, labor, union, or
professional service contract not terminable at will, or any bonus, pension,
insurance, profit sharing, incentive, deferred compensation, severance pay,
retirement, hospitalization, employee benefit, or other similar plan; or
increase the compensation payable or to become payable to any employee, or pay
or arrange to pay any bonus payment to any employee, except in the Ordinary
Course of Business.
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6.1.9. ACTIONS AFFECTING FCC LICENSES.
Take any action which may jeopardize the validity or enforceability of
or rights under the FCC Licenses.
6.1.10. PROGRAMMING.
Program or broadcast any Program Contract or syndicated program, except
in the Ordinary Course of Business.
6.1.11. ENCUMBRANCES.
Create, assume or permit to exist any Encumbrances upon any of the
Assets except for Permitted Encumbrances and Encumbrances that will be
discharged prior to or on the Transfer Date.
6.1.12. TRANSACTIONS WITH AFFILIATES.
Enter into any transaction with any Affiliate of a Seller Party that
will be binding upon Buyer, the Assets or any Station on or after the
Non-License Transfer Date or the Closing Date, except for transactions not
otherwise prohibited by this Section 6.1 and transactions between and
among Stations operating in the same DMA in the Ordinary Course of Business, in
each case on arm's length terms.
6.2. AFFIRMATIVE COVENANTS.
Pending and prior to the Non-License Transfer and the Closing, each
Seller will, and will use its commercially reasonable efforts to enforce such
rights under the Heritage Agreement to cause the Heritage Subsidiaries to take
the following actions insofar as such actions relate to the Stations:
6.2.1. PRESERVE EXISTENCE.
Preserve its corporate existence and business organization intact,
maintain its existing franchises and licenses, use commercially
reasonable efforts to preserve for Buyer the relationships of the Stations with
suppliers, customers, employees and others with whom the Stations have business
relationships, and keep all of the Assets substantially in their present
condition, ordinary wear and tear excepted.
6.2.2. NORMAL OPERATIONS.
Subject to the terms and conditions of this Agreement (including,
without limitation, Section 6.1) and the TBA Agreement, (a) carry on the
businesses and activities of the Stations, including without limitation,
promotional activities, the sale of advertising time, entering into other
contracts and agreements, or purchasing and scheduling of programming, in the
Ordinary Course of Business; (b) pay or otherwise satisfy all obligations
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(cash and barter) of the Stations in the Ordinary Course of Business; provided,
however, each Seller shall cause to be brought current as of the Transfer Date
all payments that are due and payable under Program Contracts as originally
contracted; (c) maintain books of account, records, and files with respect to
the business and operations of the Stations in substantially the same manner as
heretofore; and (d) maintain the Assets in customary repair, maintenance and
condition, except to the extent of normal wear and tear, and repair or replace,
consistently with the Ordinary Course of Business, any Asset that may be
damaged or destroyed; notwithstanding the foregoing, Buyer acknowledges that no
Seller shall be obligated to spend any funds on capital expenditures after the
date hereof, except for the repair or replacement of Assets that may be damaged
or destroyed.
6.2.3. MAINTAIN FCC LICENSES.
Maintain the validity of the FCC Licenses, and comply in all material
respects with all requirements of the FCC Licenses and the rules and
regulations of the FCC.
6.2.4. NETWORK AFFILIATION.
Use commercially reasonable efforts to maintain in full force and
effect the present network affiliation agreements for the Stations (and any and
all modifications and renewals thereof).
6.2.5. STATION CONTRACTS.
Pay and perform obligations in the Ordinary Course of Business under
the Station Contracts and under any Additional Agreements that shall be entered
into pursuant to Section 6.1.6, in accordance with the respective terms and
conditions of such Station Contracts and in accordance with the TBA Agreement.
6.2.6. TAXES.
Pay or discharge all Taxes when due and payable.
6.2.7. ACCESS.
Subject to the cooperation of the Trustee and the Heritage
Subsidiaries, cause to be afforded to representatives of Buyer reasonable
access during normal business hours to offices, properties, assets, books and
records, contracts and reports of the Stations, as Buyer shall from time to
time reasonably request; provided, however, that (a) such investigation shall
only be upon reasonable notice and shall not unreasonably disrupt the personnel
or operations of any Seller Party or the Stations, and (b) under no
circumstances shall any Seller Party be required to provide access to Buyer or
any representative of Buyer (i) any information or materials subject to
confidentiality agreements with third parties required to be kept confidential
by applicable Laws, or (ii) any privileged attorney-client communications or
attorney work product. All requests for access to the offices, properties,
assets, books and records, contracts and reports of the Stations shall be made
to such representatives as Sellers
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shall designate in writing, who shall be solely responsible for coordinating
all such requests and all access permitted hereunder. Buyer acknowledges and
agrees that neither Buyer nor its representatives shall contact any of the
employees, customers, suppliers, partners, or other associates or Affiliates of
any Seller Party or the Stations, in connection with the transactions
contemplated hereby, whether in person or by telephone, mail or other means of
communication, without the specific prior written authorization of such
representatives of Sellers. Subject to and in accordance with the terms of
this Section 6.2.7, each Seller shall, and shall use its commercially
reasonable efforts to enforce such rights under the Heritage Agreement to cause
each other Seller Party to, cooperate in all reasonable respects with Buyer's
request to conduct an audit of any financial information of the Stations as
Buyer may reasonably determine is necessary to satisfy any public company
reporting requirements pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934 including, without limitation, (a) using commercially
reasonable efforts to obtain the consent of auditors to permit Buyer, any
Affiliate of Buyer and their respective auditors to have access to such
auditors' work papers, and (b) consenting to such access by Buyer. Under no
circumstance shall the preparation of any financial statements pursuant to such
audit: (a) require any Seller Party to change or modify any accounting policy,
(b) cause any unreasonable disruption in the business or operations of any
Station, or (c) cause any delay that is more than de minimis in any internal
reporting requirements of any Seller Party. All costs and expenses incurred in
connection with the preparation of (and assimilation of relevant information
for) any such financial statements shall be paid by Buyer.
6.2.8. INSURANCE.
Maintain in full force and effect all of its existing casualty,
liability, and other insurance in amounts not less than those in effect on the
date hereof.
6.2.9. FINANCIAL STATEMENTS.
Prior to Sellers' acquisition of the Stations from the Heritage
Subsidiaries, provide Buyer with, to the extent received by Seller in
connection with the Heritage Agreement (a) unaudited monthly statements of
assets and liabilities relating to the business and operations of the Stations,
and monthly statements of revenues and expenses reflecting the results of
business and operations of the Stations for January 1998 and for each month
thereafter, within thirty (30) days after the end of each such month, and (b)
weekly sales pacing reports for the Stations and copies of any financial
statements. After Sellers' acquisition of the Stations from the Heritage
Subsidiaries and prior to the Transfer Date, provide Buyer with (a) unaudited
monthly statements of assets and liabilities relating to the business and
operations of the Stations, and monthly statements of revenues and expenses
reflecting the results of business and operations of the Stations for the month
following the month such financial statements were last provided and for each
month thereafter, within thirty (30) days after the end of each such month, and
(b) weekly sales pacing reports for the Stations and copies of any financial
statements.
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6.2.10. CONSENTS.
(a) Take all reasonable action required to obtain all consents,
approvals and agreements of any third parties necessary to authorize, approve
or permit the consummation of the transactions contemplated by this Agreement,
including, without limitation, any consent of the parties to the Station
Contracts designated as necessary in Schedule 3.4 in order to consummate the
transactions contemplated hereby (collectively, the "Restricted Contracts").
Notwithstanding anything to the contrary set forth in this Agreement or
otherwise, to the extent that the consent or approval of any third party is
required under any Restricted Contract, such Seller shall only be required to
use reasonable efforts (not involving the payment by such Seller of any money
to any party to any such Restricted Contract, except to the extent required by
Section 6.2.10(b)) to obtain such consents and approvals, and in the event that
such Seller fails to obtain any such consent or approval, Buyer shall have no
right to terminate this Agreement.
(b) Notwithstanding anything to the contrary in clause (a) above, each
Seller shall, and shall use its commercially reasonable efforts to enforce such
rights under the Heritage Agreement to cause a Heritage Subsidiary to retain
until such time as any required consents shall have been obtained by such
Seller, all rights to and under any Station Contract which requires the consent
of any other party thereto for assignment to Buyer if such consent has not been
obtained on the Closing Date (the "Deferred Contract"). Until the assignment
of the Deferred Contract, (i) each Seller shall continue to use all
commercially reasonable efforts and Buyer shall cooperate with Sellers to
obtain the consent and/or to remove any other impediments to such assignment,
and (ii) Sellers and Buyer agree to cooperate in any lawful arrangement to
provide (to the extent permitted without breach of such Deferred Contract) that
Buyer shall receive the benefits of such interest after the Closing Date to the
same extent as if it were the lessee thereunder; provided, however, if Buyer
shall fail to receive such benefits after the Closing Date for any Leased
Property that is a main transmitter tower site or a studio site for any Station
(the "Designated Properties"), Sellers agree to make such payments as are
necessary for Buyer to receive such benefits as long as the aggregate amount of
all such payments does not exceed Two Hundred Thousand Dollars ($200,000) for
all such Designated Properties under this Agreement. If, subsequent to the
Closing, any Seller shall obtain required consents to assign any Deferred
Contract, the Deferred Contract for which consent to assign has been obtained
shall at that time be deemed to be conveyed, granted, bargained, sold,
transferred, setover, assigned, released, delivered and confirmed to Buyer,
without need of further action by any Seller or of future documentation.
6.2.11. CORPORATE ACTION.
Take all corporate action (including, without limitation, all
shareholder action), under the Law of any state having jurisdiction over
such Seller necessary to effectuate the transactions contemplated by this
Agreement and the other Seller Documents.
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6.2.12. ENVIRONMENTAL AUDIT.
Subject to the cooperation of the Trustee, permit Buyer and Buyer's
agents, as soon as practical after the date hereof and upon Buyer's request
therefor, access to the Real Property and the Leased Property for the purpose
of conducting, at Buyer's expense, Phase I and Phase II environmental
audits. Any such environmental audits shall be conducted by a reputable
environmental investigatory firm of Buyer's choice subject to the reasonable
approval of Sellers and in a manner as will not unreasonably interfere with the
normal business and operations of any of the Stations.
6.2.13. HERITAGE AGREEMENT.
Consummate the acquisition of the Assets in accordance with all of the
provisions of the Heritage Agreement and use commercially reasonable efforts to
pursue in a timely manner any claims relating to the Stations that Sellers may
have under the Heritage Agreement.
6.3. CONFIDENTIALITY.
Each Seller shall, at all times, maintain strict confidentiality with
respect to all documents and information furnished to such Seller by or on
behalf of Buyer. Nothing shall be deemed to be confidential information that:
(a) is known to a Seller at the time of its disclosure to such Seller; (b)
becomes publicly known or available to a Seller other than through disclosure
by such Seller; (c) is received by a Seller from a third party not actually
known by such Seller to be bound by a confidentiality agreement with or
obligation to Buyer; or (d) is independently developed by a Seller.
Notwithstanding the foregoing provisions of this Section 6.3, each Seller may
disclose such confidential information (a) to the extent required or deemed
advisable to comply with applicable Laws; (b) to its officers, directors,
employees, representatives, financial advisors, attorneys, accountants, and
agents with respect to the transactions contemplated hereby (so long as such
parties agree to maintain the confidentiality of such information); (c) to the
Heritage Subsidiaries and the Trustee, as necessary, with respect to the
transactions contemplated hereby (so long as such parties agree to maintain the
confidentiality of such information); and (d) to any Governmental Authority in
connection with the transactions contemplated hereby. In the event this
Agreement is terminated, each Seller will return to Buyer all documents and
other material prepared or furnished by Buyer relating to the transactions
contemplated hereunder, whether obtained before or after the execution of this
Agreement.
6.4. HERITAGE ACQUISITION.
Upon receipt of a written notice by Sellers from Buyer that the Buyer
is prepared to proceed with the Non-License Transfer hereunder simultaneously
with (or immediately following) the acquisition of the Stations from the
Heritage Subsidiaries, Sellers agree to acquire the Stations from the Heritage
Subsidiaries as promptly as possible to the extent permitted under the Heritage
Agreement. Notwithstanding the foregoing, nothing in the
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preceding sentence shall constitute a waiver by Buyer of any conditions
precedent to Buyer's obligation to proceed with the Non-License Transfer.
ARTICLE 7.
COVENANTS AND AGREEMENTS OF BUYER
Buyer covenants and agrees with Sellers as follows:
7.1. CONFIDENTIALITY.
Buyer shall, at all times prior to the Non-License Transfer and the
Closing, maintain strict confidentiality with respect to all documents and
information furnished to Buyer by or on behalf of a Seller. Nothing shall be
deemed to be confidential information that: (a) is known to Buyer at the time
of its disclosure to Buyer; (b) becomes publicly known or available other than
through disclosure by Buyer; (c) is received by Buyer from a third party not
actually known by Buyer to be bound by a confidentiality agreement with or
obligation to a Seller; or (d) is independently developed by Buyer.
Notwithstanding the foregoing provisions of this Section 7.1, Buyer may
disclose such confidential information (a) to the extent required or deemed
advisable to comply with applicable Laws; (b) to its officers, directors,
partners, employees, representatives, financial advisors, attorneys,
accountants, agents, underwriters, lenders, investors and any other potential
sources of financing with respect to the transactions contemplated hereby (so
long as such parties agree to maintain the confidentiality of such
information); and (c) to any Governmental Authority in connection with the
transactions contemplated hereby. In the event this Agreement is terminated,
Buyer will return to Sellers all documents and other material prepared or
furnished by Sellers relating to the transactions contemplated by this
Agreement, whether obtained before or after the execution of this Agreement.
7.2. CORPORATE ACTION.
Prior to the Non-License Transfer and the Closing, Buyer shall take all
corporate action (including, without limitation, all shareholder action), under
the Laws of any state having jurisdiction over Buyer necessary to effectuate
the transactions contemplated by this Agreement and the other Buyer Documents.
7.3. ACCESS.
From and after the Transfer Date for a period of three (3) years, Buyer
shall cause to be afforded to representatives of Sellers and the Heritage
Subsidiaries reasonable access during normal business hours to the offices,
books and records, contracts and reports of the Stations which relate to the
operations of the Stations during the period during which the Stations were
owned by the Sellers or the Heritage Subsidiaries, as Sellers or the Heritage
Subsidiaries shall from time to time reasonably request; provided, however,
that (a) such
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investigation shall only be upon reasonable notice and shall not unreasonably
disrupt the personnel or operations of Buyer or the Stations, and (b) under no
circumstances shall Buyer be required to provide access to any Seller, any
Heritage Subsidiary or any representatives of any Seller or any Heritage
Subsidiary (i) any information or materials subject to confidentiality
agreements with third parties required to be kept confidential by applicable
Laws, or (ii) any privileged attorney-client communications or attorney work
product. All requests for access to the offices, books and records, contracts
and reports of the Stations shall be made to such representatives as Buyer
shall designate in writing, who shall be solely responsible for coordinating
all such requests and all access permitted hereunder. Buyer agrees not to
dispose of any such books and records, contracts and reports of the Stations
which relate to the operations of the Stations during the period during which
the Stations were owned by Sellers or the Heritage Subsidiaries without
consulting with Sellers prior to disposal thereof and taking any reasonable
action requested by Sellers with respect to retention and transfer to Sellers
thereof.
7.4. COLLECTION OF RECEIVABLES.
At the earlier of the Non-License Transfer or the Closing, Sellers
shall assign the Accounts Receivable to Buyer for collection purposes only,
and, within ten (10) business days after the Transfer Date, Seller shall
furnish to Buyer a list of the Accounts Receivable by accounts and the amounts
then owing. Buyer agrees, for a period of one hundred fifty (150) days
following the Transfer Date, without any requirement to litigate to collect the
Accounts Receivable, to use its reasonable efforts (with at least the care and
diligence Buyer uses to collect its own accounts receivable) to collect for
Sellers the Accounts Receivable and to remit to Sellers (or their designees) on
the fifth day following the last day of each month occurring during such one
hundred fifty (150) day period (or, if any such day is a Saturday, Sunday or
holiday, on the next day on which banking transactions are resumed),
collections received by Buyer with respect to the Accounts Receivable. Buyer
shall not make any referral or compromise of any Accounts Receivable to a
collection agency or attorney for collection and shall not compromise for less
than full value any Account Receivable without the prior written consent of
Sellers. Any Account Receivable not collected by Buyer within one hundred
fifty (150) days following the Closing Date shall revert to Sellers (or their
designees). Buyer shall reassign, without recourse to Buyer, each Account
Receivable and deliver to Sellers, all records relating thereto on the same day
as it remits to Sellers (or their designees) the collections received. All
payments in respect of the Accounts Receivable received during the one hundred
fifty (150) day period shall be first applied to the oldest balance then due on
the Accounts Receivable unless the account debtor indicates in writing that
payment is to be applied otherwise due to a dispute over an Account Receivable.
Buyer agrees, upon the reasonable request of Sellers, to furnish to Sellers
periodic reports on the status of its Accounts Receivable. Buyer shall have no
right to set-off any amounts collected for Accounts Receivable for any amounts
owed to Buyer by Sellers; provided, however, that Buyer shall have the right to
seek indemnification in accordance with the terms and conditions of this
Agreement.
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ARTICLE 8.
MUTUAL COVENANTS AND UNDERSTANDINGS
OF SELLERS AND BUYER
8.1. POSSESSION AND CONTROL.
Between the date hereof and the Closing Date, Buyer shall not directly
or indirectly control, supervise or direct, or attempt to control, supervise or
direct, the business and operations of the Stations, and such operation,
including complete control and supervision of all programming, shall be the
sole responsibility of the owners of the Stations, except as contemplated by
the LMA Agreement after the Non-License Transfer. On and after the Closing
Date, Sellers shall have no control over, or right to intervene, supervise,
direct or participate in, the business and operations of the Stations.
8.2. RISK OF LOSS.
The risk of loss or damage by fire or other casualty or cause to the
Assets until the Transfer Date shall be upon Sellers. Except as otherwise
provided in Section 9.3, in the event of loss or damage prior to the Transfer
Date with respect to which Sellers have adequate replacement cost insurance and
which has not been restored, replaced, or repaired as of the Transfer Date,
Buyer shall proceed with the Non-License Transfer or the Closing, as
applicable, and receive at the Non-License Transfer or the Closing, as
applicable, the insurance proceeds or an assignment of the right to receive
such insurance proceeds, as applicable, to which Sellers otherwise would be
entitled, whereupon Sellers shall have no further liability to Buyer for such
loss or damage.
8.3. PUBLIC ANNOUNCEMENTS.
Sellers and Buyer shall consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement or the transactions contemplated herein and shall not issue any such
press release or make any such public statement without the prior written
consent of the other parties hereto, which shall not be unreasonably withheld;
provided, however, that a party may, without consulting with the other parties,
issue such press release or make such public statement as may be required by
Law or any listing agreement with a national securities exchange to which STC
or Sinclair is a party if it has used all reasonable efforts to consult with
the other party and to obtain such party's consent but has been unable to do so
in a timely manner.
8.4. EMPLOYEE MATTERS.
8.4.1. Upon the earlier of the Non-License Transfer or the
Closing, Buyer shall offer employment to each of the employees of the Stations
(including those on leave of absence, whether short-term, long-term, family,
maternity, disability, paid, unpaid or other), at a comparable salary, position
and place of employment as held by each such employee
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immediately prior to the Transfer Date (such employees who are given such
offers of employment and accept such offers are referred to herein as the
"Transferred Employees"); provided, however, that the two (2) employees of the
Stations designated in the TBA Agreement shall continue as employees of Sellers
and shall not become Transferred Employees hereunder until the Closing.
Nothing in this Section 8.4.1 is intended to guarantee employment for any
Transferred Employee for any length of time after the Transfer Date.
8.4.2. Except as provided otherwise in this Section 8.4,
Sellers shall pay, discharge and be responsible for (a) all salary and wages
arising out of or relating to the employment of the employees of the Stations
prior to the Transfer Date and (b) any employee benefits arising under the
Benefit Plans of any Seller Party, any Heritage Subsidiary and their Affiliates
during the period prior to the Transfer Date. From and after the Transfer
Date, Buyer shall pay, discharge and be responsible for all salary, wages and
benefits arising out of or relating to the employment of the Transferred
Employees by Buyer on and after the Transfer Date. Buyer shall be responsible
for all severance Liabilities, and all COBRA Liabilities for any Transferred
Employees of the Stations terminated by Buyer on or after the Transfer Date,
including, without limitation all Liabilities under the retention and severance
agreements set forth on Schedule 8.4.8 (subject to the reimbursement
obligations of Sellers set forth in Section 8.4.8).
8.4.3. Buyer shall cause all Transferred Employees as of the
Transfer Date to be eligible to participate in its "employee welfare benefit
plans" and "employee pension benefit plans" (as defined in Section 3(1) and
3(2) of ERISA, respectively) of Buyer in which similarly situated employees of
Buyer are generally eligible to participate; provided, however, that all
Transferred Employees and their spouses and dependents shall be eligible for
coverage immediately after the Transfer Date (and shall not be excluded from
coverage on account of any pre-existing condition) to the extent provided under
such plans with respect to Transferred Employees.
8.4.4. For purposes of any length of service requirements,
waiting periods, vesting periods or differential benefits based on length of
service in any such plan for which a Transferred Employee may be eligible after
the Transfer Date, Buyer shall ensure that, to the extent permitted by law,
service by such Transferred Employee with any Seller, any Heritage Subsidiary
or any Affiliate of Sellers or the Heritage Subsidiaries shall be deemed to
have been service with Buyer. In addition, Buyer shall ensure that each
Transferred Employee receives credit under any welfare benefit plan of Buyer
for any deductibles or co-payments paid by such Transferred Employee and his or
her dependents for the current plan year under a plan maintained by any Seller,
any Heritage Subsidiary or any Affiliate of Sellers or the Heritage
Subsidiaries. Buyer shall grant credit to each Transferred Employee for all
sick leave in accordance with the policies of Buyer applicable generally to its
employees after giving effect to service for any Seller or any Heritage
Subsidiary as service for Buyer. To the extent taken into account in
determining the Final Proration Amount, Buyer shall assume and discharge
Liabilities of Sellers for the payment of all unused vacation leave accrued by
Transferred Employees as of the Transfer Date. To the extent any claim with
respect to such accrued vacation leave is lodged against Sellers, with respect
to any Transferred Employee, Buyer shall indemnify, defend and
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hold harmless Sellers from and against any and all losses, directly or
indirectly, as a result of, or based upon or arising from the same.
8.4.5. As soon as practicable following the Transfer Date,
Buyer shall establish and maintain a defined contribution plan or plans (which
may be a preexisting plan or plans (the "Buyer's Plan") intended to be
qualified under Section 401(a) and 401(k) of the Code for the benefit of the
Transferred Employees. Effective as of the Transfer Date, Sellers shall, and
shall use their commercially reasonable efforts to enforce such rights under
the Heritage Agreement to cause the Heritage Subsidiaries to, cause appropriate
amendments to be made to all retirement savings plans to which any Transferred
Employees participate (the "Sellers' Plan") to provide that the Transferred
Employees shall be fully vested in their accounts under the Sellers' Plan. As
soon as practicable after the Transfer Date, Buyer shall take all necessary
action to qualify the Buyer's Plan under the applicable provisions of the Code
(including but not limited to Section 401), if it is not yet so qualified, and
Buyer and Sellers shall make any and all filings and submissions to the
appropriate governmental agencies required to be made by them in connection
with the transfer of assets described hereafter. As soon as practicable
following the earlier of the receipt of a favorable determination letter from
the Internal Revenue Service regarding the qualified status of both the
Sellers' Plan and the Buyer's Plan (each as amended to the date of transfer) or
sooner, if Sellers and Buyer so agree, Sellers shall, and shall use their
commercially reasonable efforts to enforce such rights under the Heritage
Agreement to, cause the Heritage Subsidiaries to cause to be transferred to the
Buyer's Plan, in cash and in kind, all of the individual account balances of
Transferred Employees under the Sellers' Plan, including any outstanding plan
participant loan receivables allocated to such accounts.
8.4.6. Buyer acknowledges and agrees that Buyer's obligations
pursuant to this Section 8.4 are in addition to, and not in limitation of,
Buyer's obligation to assume the employment contracts set forth on Schedule
2.1.8.
8.4.7. Except as otherwise provided in this Section 8.4 or in
any employment, severance or retention agreements of any Transferred Employees,
all Transferred Employees shall be at-will employees, and Buyer may terminate
their employment or change their terms of employment at will. No employee (or
beneficiary of any employee) of the Stations may sue to enforce the terms of
this Agreement, including specifically this Section 8.4, and no employee or
beneficiary shall be treated as a third party beneficiary of this Agreement.
Except to the extent provided for herein, Buyer may cover the Transferred
Employees under existing or new benefit plans, programs, and arrangements, and
may amend or terminate any such plans, programs, or arrangements at any time.
8.4.8. To the extent that Sellers receive any severance
payments from the Heritage Subsidiaries in connection with the termination of
employment by Sellers or Buyer of a general manager for the Stations in
accordance with the terms of the Heritage Agreement, Sellers shall pay any such
amounts received from the Heritage Subsidiaries to Buyer within five (5) days
of receipt.
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8.5. DISCLOSURE SCHEDULES.
Prior to Sellers' acquisition of the Stations from the Heritage
Subsidiaries, Sellers shall have the right from time to time to update or
correct Schedules 2.1.5, 2.1.6, 2.1.9, 2.1.10, 3.4 and 3.17 attached hereto
solely to reflect actions by Sellers or the Heritage Subsidiaries after the
date hereof which are not prohibited by Section 6.1 of the Heritage Agreement
or this Agreement. From and after Sellers' acquisition of the Stations from
the Heritage Subsidiaries and prior to the Transfer Date, Sellers shall have
the obligation to update or correct Schedules 2.1.5, 2.1.6, 2.1.9, 2.1.10, 3.4
and 3.17 attached hereto solely to reflect actions by Sellers which are not
prohibited by Section 6.1 hereof. The inclusion of any fact or item on a
Schedule referenced by a particular section in this Agreement shall, should the
existence of the fact or item or its contents, be relevant to any other
section, be deemed to be disclosed with respect to such other section whether
or not an explicit cross-reference appears in the Schedules.
8.6. BULK SALES LAWS.
Buyer hereby waives compliance by Sellers, in connection with the
transactions contemplated hereby, with the provisions of any applicable bulk
transfer laws.
8.7. TAX MATTERS.
Each party hereto represents, warrants, covenants and agrees that for
tax purposes the sale of Assets (except for the License Assets) is not
effective until the Transfer Date, and the sale of the License Assets is not
effective until the Closing Date. Seller and Buyer agree that all Tax returns
and reports shall be filed consistent with the sale of Assets taking place as
aforesaid.
8.8. PRESERVATION OF BOOKS AND RECORDS.
For a period of three (3) years after the Closing Date, Sellers agree
not to dispose of, and agree to provide Buyer reasonable access to, any
material books or records in possession of Sellers immediately after the
Transfer Date that relate to the business or operations of the Stations prior
to the Transfer Date.
8.9. TBA AGREEMENT.
At the Non-License Transfer pursuant to Section 11.2, Buyer and Sellers
shall enter into a time brokerage agreement for the Stations substantially in
the form of Exhibit E hereto (the "TBA Agreement").
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ARTICLE 9.
CONDITIONS PRECEDENT TO
OBLIGATIONS OF BUYER
The obligations of Buyer to purchase the Assets and to consummate the
Non-License Transfer or proceed with the Closing, as applicable, are subject to
the satisfaction (or waiver in writing by Buyer) at or prior to the Non-License
Transfer or the Closing, as applicable, of each of the following conditions:
9.1. CLOSING UNDER THE HERITAGE AGREEMENT.
Sellers shall have acquired the Assets pursuant to the terms of the
Heritage Agreement.
9.2. REPRESENTATIONS AND COVENANTS.
The representations and warranties of Sellers made in this Agreement
shall be true and correct on and as of the Non-License Transfer Date or the
Closing Date, as applicable, with the same effect as though such
representations and warranties had been made on and as of the Non-License
Transfer Date or the Closing Date, as applicable (except as modified by the
Schedules updated after the date hereof in accordance with Section 8.5 and
except for representations and warranties that speak as of a specific date or
time other than the Non-License Transfer Date or the Closing Date, as
applicable (which need only be true and correct in all material respects as of
such date or time)), and the covenants and agreements of Sellers required to be
performed on or before the Non-License Transfer Date or the Closing Date, as
applicable, in accordance with the terms of this Agreement shall have been
performed in all respects, except to the extent that the failure of such
representations and warranties to be true and correct and the failure to
perform such covenants shall not have, when considered together, had a material
adverse effect on any material FCC Licenses or on the broadcast transmissions
of any Station (a "Transmission Defect"); provided, however, if a Transmission
Defect exists as of the Non-License Transfer Date or the Closing Date, as
applicable, then either or both of Sellers and Buyer shall be entitled, by
written notice to the other, to postpone the Non-License Transfer Date or the
Closing Date, as applicable, for a period of up to sixty (60) days to resume
such Station's broadcast transmission.
9.3. NO TRANSMISSION DEFECTS.
There shall not exist any loss or damage at any of the Stations which
has resulted in the regular broadcast transmission of such Station (including
its effective radiated power) to be diminished in any material respect;
provided, that if any such loss or damage does exist, then either or both of
Sellers and Buyer shall be entitled, by written notice to the other, to
postpone the Non-License Transfer Date or the Closing Date, as applicable, for
a period of up to sixty (60) days to resume such Station's broadcast
transmission.
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9.4. DELIVERY OF DOCUMENTS.
Sellers shall have delivered to Buyer all contracts, agreements,
instruments and documents required to be delivered by Sellers to Buyer pursuant
to Section 11.4.
9.5. FCC ORDER.
The FCC Order shall have been issued with respect to each Station;
provided, however, that there shall be no requirement that the FCC Order shall
have been issued as of the Non-License Transfer Date.
9.6. HART-SCOTT-RODINO.
All applicable waiting periods under Hart-Scott-Rodino shall have
expired or terminated.
9.7. LEGAL PROCEEDINGS.
No injunction, restraining order or decree of any nature of any court
or Governmental Authority of competent jurisdiction shall be in effect
that restrains or prohibits the transactions contemplated by this Agreement.
ARTICLE 10.
CONDITIONS PRECEDENT TO
OBLIGATION OF SELLERS
The obligations of Sellers to sell, transfer, convey and deliver the
Assets and to consummate the Non-License Transfer or to proceed with the
Closing, as applicable, are subject to the satisfaction (or waiver in writing
by Sellers) at or prior to the Non-License Transfer or the Closing, as
applicable, of each of the following conditions:
10.1. CLOSING UNDER THE HERITAGE AGREEMENT.
Sellers shall have acquired the Assets pursuant to the terms of the
Heritage Agreement.
10.2. REPRESENTATIONS AND COVENANTS.
The representations and warranties of Buyer made in this Agreement
shall be true and correct in all material respects on and as of the Non-License
Transfer Date or the Closing Date, as applicable, with the same effect as
though such representations and warranties had been made on and as of the
Non-License Transfer Date or the Closing Date, as applicable, (except for
representations and warranties that speak as of a specific date or time other
than the
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Non-License Transfer Date or the Closing Date, as applicable, (which need only
be true and correct in all material respects as of such date or time)), and the
covenants and agreements of Buyer required to be performed on or before the
Non- License Transfer Date or the Closing Date, as applicable, in accordance
with the terms of this Agreement shall have been performed in all material
respects.
10.3. DELIVERY BY BUYER.
Buyer shall have delivered to Sellers the Purchase Price in accordance
with Section 2.5 and all contracts, agreements, instruments and documents
required to be delivered by Buyer to Seller pursuant to Section 11.5.
10.4. FCC ORDER.
The FCC Order shall have been issued with respect to each Station;
provided, however, that there shall be no requirement that the FCC Order shall
have been issued as of the Non-License Transfer Date.
10.5. HART-SCOTT-RODINO.
All applicable waiting periods under Hart-Scott-Rodino shall have
expired or terminated.
10.6. LEGAL PROCEEDINGS.
No injunction, restraining order or decree of any nature of any court
or Governmental Authority of competent jurisdiction shall be in effect that
restrains or prohibits the transactions contemplated by this Agreement.
ARTICLE 11.
CLOSING; NON-LICENSE TRANSFER
11.1. CLOSING.
11.1.1. To the extent not previously transferred pursuant to
the Non-License Transfer, the closing for all of the Assets hereunder (the
"Closing") shall be held on a date specified by Buyer that is within ten (10)
days after the later of (a) the date on which all applicable waiting periods
under Hart-Scott-Rodino shall have expired or terminated, or (b) the date on
which all of the FCC Orders for all Stations shall have been issued (the date
on which the Closing shall occur pursuant to this Section 11.1 is referred to
herein as the "Closing Date").
11.1.2. If the Closing shall not have occurred on or prior to
such date which is two (2) years after the date of this Agreement due to the
failure to receive an FCC Order for
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reasons relating solely to Buyer's qualifications, Buyer shall designate a
successor licensee and the parties will cooperate to secure the necessary
governmental approvals to cause the designated successor to become the
licensee. If the Closing shall not have occurred on or prior to such date
which is four (4) years after the date of this Agreement due to the failure to
receive an FCC Order for reasons relating solely to any Seller, Sellers shall
jointly and severally indemnify, defend and hold Buyer harmless from and
against any and all actual Losses incurred by Buyer as a result of the FCC's
failure to issue such FCC Order by such date for such reasons. All proceeds
received from a transfer of the License Assets to any such successor licensee
shall be for Buyer; provided, however, to the extent Buyer has not incurred any
Losses for which the Sellers have indemnified Buyer pursuant to the preceding
sentence, Sellers shall receive the amount of TWO MILLION DOLLARS ($2,000,000)
which would otherwise have been payable to Sellers at Closing pursuant to
Section 2.5.2.
11.1.3. If the Closing shall not have occurred on or prior to
such date which is four (4) years after the date of this Agreement, Sellers and
Buyer acknowledge and agree to cooperate and use commercially reasonable
efforts to consummate the sale to a third party of both the License Assets and
the Non-License Assets in an orderly and mutually satisfactory manner (the
"Third Party Sale"). At the closing of the Third Party Sale pursuant to this
Section 11.1.3, (a) up to Two Million Dollars ($2,000,000) of the proceeds
therefrom shall be paid directly to Sellers by wire transfer of immediately
available funds to an account identified by Sellers in writing, and (b) any
proceeds therefrom in excess of the Two Million Dollars ($2,000,000), if any,
shall be paid directly to Buyer by wire transfer of immediately available funds
to an account identified by Buyer writing.
11.2. NON-LICENSE TRANSFER.
11.2.1. Notwithstanding anything to the contrary herein,
provided that the conditions set forth in Article 9 (except for Section 9.5)
and Article 10 (except for Section 10.4) shall have been satisfied and the
Closing shall not have occurred, there shall be a closing (the "Non-License
Transfer") for the purchase and sale of all of the Assets, other than the
License Assets, upon the earlier to occur of (a) such date which is
seventy-five (75) days after the date of this Agreement (the "Outside Date"),
or (b) any date prior to the Outside Date specified by Buyer in writing at
least five (5) days prior to such date (the date on which the Non-License
Transfer shall occur pursuant to this Section 11.2.1 is referred to herein as
the "Non-License Transfer Date"). The parties acknowledge and agree that if
the conditions set forth in Article 9 (except for Section 9.5) and Article 10
(except for Section 10.4) are not satisfied as of the Outside Date, the Outside
Date shall be such date which is ten (10) days after satisfaction of all such
conditions (subject to rights of Sellers and Buyer to terminate this Agreement
prior to such date in accordance with Article 13).
11.2.2. At the Non-License Transfer, Sellers shall sell,
assign, transfer, convey and deliver to Buyer free and clear of any
Encumbrances other than Permitted Encumbrances, and Buyer shall purchase,
acquire, pay for and accept from Sellers, all right, title and interest of
Sellers in, to and under the Assets, other than the License Assets.
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11.3. TIME AND PLACE OF NON-LICENSE TRANSFER AND CLOSING.
The Closing and the Non-License Transfer shall be held at 10:00 A.M.
local time on the Closing Date and the Non-License Transfer Date,
respectively, at the offices of Hogan & Hartson L.L.P., 8300 Greensboro Drive,
Suite 1100, McLean, Virginia, or at such other time and place as the parties
may agree.
11.4. DELIVERIES BY SELLERS.
At the Non-License Transfer and the Closing, as applicable, Sellers
shall deliver to Buyer the following:
11.4.1. AGREEMENTS AND INSTRUMENTS.
The following bills of sale, assignments and other instruments of
transfer duly executed by Sellers:
(a) a Bill of Sale;
(b) an Assignment of FCC Licenses; provided that the
Assignment of Licenses shall not be delivered at a
Non-License Transfer;
(c) an Assignment of Contracts and Leases;
(d) an Assumption Agreement;
(e) certificates of title with respect to the motor
vehicles listed on Schedule 2.1.9 or if any such
motor vehicles are leased by a Seller, an
assignment of such lease;
(f) special or limited warranty deeds for all Real
Property in the form appropriate to the
jurisdictions in which such Real Property is
located; and
(g) the TBA Agreement.
11.4.2. CONSENTS.
Copies of all consents Sellers have been able to obtain to effect the
assignment to Buyer of the Station Contracts listed on Schedule 3.4.
11.4.3. CERTIFIED RESOLUTIONS.
A copy of the approval of the board of directors and the stockholders
of each Seller, certified as being correct and complete and then in full force
and effect, authorizing the execution, delivery and performance of this
Agreement, and of the other Seller Documents, and the consummation of the
transactions contemplated hereby and thereby.
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11.4.4. OFFICERS' CERTIFICATES.
(a) A certificate of each Seller certifying the matters set forth in
Section 9.2; and
(b) A certificate of each Seller as to the incumbency of the
representatives of such Seller executing this Agreement or any of the other
Seller Documents on behalf of such Seller, and true and correct copies of the
organizational documents of each Seller.
11.4.5. GOOD STANDING CERTIFICATES.
To the extent available from the applicable jurisdictions, certificates
as to the formation and/or good standing of each Seller issued by the
appropriate governmental authorities in the states of organization and each
jurisdiction in which such Seller is qualified to do business, each such
certificate (if available) to be dated a date not more than a reasonable number
of days prior to the Transfer Date.
11.5. DELIVERIES BY BUYER.
At the Non-License Transfer and the Closing, Buyer shall deliver to
Sellers the following:
11.5.1. PURCHASE PRICE PAYMENT.
The Purchase Price in the amount and manner set forth in Section 2.5.
11.5.2. AGREEMENTS AND INSTRUMENTS.
The Assumption Agreement and other instruments of transfer duly
executed by Buyer.
11.5.3. CERTIFIED RESOLUTIONS.
Copies of the resolutions of the board of directors and stockholder of
Buyer, certified as being correct and complete and then in full force and
effect, authorizing the execution, delivery and performance of this Agreement
and of the other Buyer Documents, and the consummation of the transactions
contemplated hereby and thereby.
11.5.4. OFFICERS' CERTIFICATE.
(a) A certificate of Buyer signed by an officer of Buyer certifying the
matters set forth in Section 10.2; and
(b) A certificate signed by the Secretary of Buyer as to the incumbency
of the officers of Buyer executing this Agreement or any of the other Buyer
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Documents on behalf of Buyer, and true and correct copies of the organizational
documents of Buyer.
ARTICLE 12.
SURVIVAL; INDEMNIFICATION
12.1. SURVIVAL OF REPRESENTATIONS.
12.1.1. Unless otherwise set forth herein (including, without
limitation, Section 12.1.2), all representations and warranties, covenants and
agreements of Sellers and Buyer contained in or made pursuant to this Agreement
or in any certificate furnished pursuant hereto shall survive the Non-License
Transfer Date or the Closing Date, as applicable, and shall remain in full
force and effect to the following extent: (a) representations and warranties
with respect to the Non-License Assets shall survive for a period of twelve
(12) months after the Non-License Transfer Date, (b) representations and
warranties with respect to the License Assets shall survive for a period of
twelve (12) months after the Closing Date, (c) the covenants and agreements
with respect to the Non-License Assets which by their terms survive the
Non-License Transfer Date shall continue in full force and effect until fully
discharged (but not beyond the expiration of twelve (12) months after the
Non-License Transfer Date), (d) the covenants and agreements with respect to
the License Assets which by their terms survive the Closing Date shall continue
in full force and effect until fully discharged (but not beyond the expiration
of twelve (12) months after the Closing Date), and (e) any representation,
warranty, covenant or agreement that is the subject of a claim which is
asserted in a reasonably detailed writing prior to the expiration of the
survival period set forth in this Section 12.1.1, shall survive with respect to
such claim or dispute until the final resolution thereof.
12.1.2. No claim for indemnification may be made pursuant to
this Article 12 after the survival period set forth in this Section 12.1.
12.2. INDEMNIFICATION BY SELLERS.
Subject to the conditions and provisions of Section 12.4 and Section
12.5, from and after the Transfer Date, Sellers jointly and severally agree to
indemnify, defend and hold harmless Buyer from and against and in any respect
of, on a net after-tax basis, any and all Losses, asserted against, resulting
to, imposed upon or incurred by Buyer, directly or indirectly, by reason of or
resulting from: (a) any failure by Sellers to pay, perform or discharge any
Liabilities not assumed by Buyer pursuant hereto; (b) the business or
operations of the Stations during the period prior to the Transfer Date (except
to the extent Buyer has assumed the Liability for any such Losses pursuant
hereto); (c) any misrepresentation or breach of the representations and
warranties of any Seller contained in or made pursuant to this Agreement or any
other Seller Document; (d) any breach by Sellers of any covenants of Sellers
contained in or made pursuant to this Agreement or any other Seller Document;
or (e) the failure of any Seller to comply with the provisions of any
applicable bulk transfer law.
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12.3. INDEMNIFICATION BY BUYER.
Subject to the conditions and provisions of Section 12.4 and Section
12.5, from and after the Transfer Date, Buyer hereby agrees to indemnify,
defend and hold harmless Sellers from, against and with respect of, on a net
after-tax basis, any and all Losses, asserted against, resulting to, imposed
upon or incurred by Sellers, directly or indirectly, by reason of or resulting
from: (a) any failure by Buyer to pay, perform or discharge any Liabilities
assumed by Buyer pursuant hereto; (b) the business or operations of the
Stations during the period from and after the Transfer Date; (c) any
misrepresentation or breach of the representations and warranties of Buyer
contained in or made pursuant to this Agreement or any other Buyer Document; or
(d) any breach by Buyer of any covenants of Buyer contained in or made pursuant
to this Agreement or any other Buyer Document.
12.4. LIMITATIONS ON INDEMNIFICATION.
12.4.1. Notwithstanding any other provision of this Agreement
to the contrary, in no event shall Losses include a party's incidental,
consequential or punitive damages, regardless of the theory of recovery. Each
party hereto agrees to use reasonable efforts to mitigate any losses which form
the basis for any claim for indemnification hereunder.
12.4.2. Notwithstanding any other provision of this Agreement
to the contrary, Sellers shall not be liable to Buyer in respect of any
indemnification hereunder except to the extent that the aggregate amount of
Losses of Buyer under this Agreement exceeds Five Hundred Thousand Dollars
($500,000) (the "Basket Amount"), and then only to the extent of the excess
over the amount of Two Hundred Fifty Thousand Dollars ($250,000); provided,
however, that the aggregate amount of Losses of Buyer under this Agreement
shall not exceed Four Million Dollars ($4,000,000) (the "Indemnity Cap");
further provided, however, the Basket Amount shall not be applicable to any
amounts owed in connection with the determination of the Proration Amount
pursuant to Section 2.6, to the payment or reimbursement obligations of Sellers
under Sections 8.2 and 8.4.8, or to the indemnities set forth in Section
12.2(a) or Section 12.2(b); further provided, however, the Indemnity Cap shall
not be applicable (i) if the transfer of the License Assets to Buyer has not
occurred on or prior to such date which is four (4) years from the date of this
Agreement as a result of a default under, or breach of, any of the terms of
this Agreement by Sellers, (ii) if the Closing has not occurred on or prior to
such date which is four (4) years from the date of this Agreement under the
circumstances described in the second sentence of Section 11.1.2, or (iii) in
the event of fraud.
12.4.3. Notwithstanding any other provision of this Agreement
to the contrary, Buyer acknowledges and agrees that the maximum aggregate
liability of Sellers pursuant to this Agreement to Buyer and any third parties
for any and all Losses shall not exceed the Indemnity Cap, regardless of whether
Buyer seeks indemnification pursuant to this Article 12, regardless of the form
of action, whether in contract or tort, including negligence, and regardless of
whether or not Sellers are notified of the possibility of damages to Buyer or
any other third party; provided, however, the Indemnity Cap shall not be
applicable if the transfer of
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the License Assets to Buyer has not occurred on or prior to such date which is
four (4) years from the date of this Agreement as a result of a default under,
or breach of, any of the terms of this Agreement by Sellers, (ii) if the
Closing has not occurred on or prior to such date which is four (4) years from
the date of this Agreement under the circumstances described in the second
sentence of Section 11.1.2, or (iii) in the event of fraud.
12.4.4. Each party (a "recipient party") shall notify the
other party in writing (the "representing party") reasonably promptly of any
perceived breach by the representing party of which the recipient party has
knowledge of any representations, warranties, covenants and agreements, and of
any Losses (including a brief description of the same) of the recipient party
caused thereby. In the event of any breach that is cured prior to the Transfer
Date in accordance with the terms of this Agreement, the representing party
shall have no obligation under Section 12.2 or Section 12.3 or otherwise to
indemnify the recipient party with respect to such Losses.
12.5. CONDITIONS OF INDEMNIFICATION.
The obligations and liabilities of Sellers and of Buyer hereunder with
respect to their respective indemnities pursuant to this Article 12, resulting
from any Losses, shall be subject to the following terms and conditions:
12.5.1. The party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Losses promptly after the Indemnified
Party receives notice thereof; provided that the failure to give such notice
shall not affect the rights of the Indemnified Party hereunder except to the
extent that the Indemnifying Party shall have suffered actual damage by reason
of such failure.
12.5.2. The Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing, the defense
of such Losses at the Indemnifying Party's risk and expense.
12.5.3. In the event that the Indemnifying Party shall elect
not to undertake such defense, or, within a reasonable time after notice from
the Indemnified Party of any such Losses, shall fail to defend, the Indemnified
Party (upon further written notice to the Indemnifying Party) shall have the
right to undertake the defense, compromise or settlement of such Losses, by
counsel or other representatives of its own choosing, on behalf of and for the
account and risk of the Indemnifying Party (subject to the right of the
Indemnifying Party to assume defense of such Losses at any time prior to
settlement, compromise or final determination thereof). In such event, the
Indemnifying Party shall pay to the Indemnified Party, in addition to the other
sums required to be paid hereunder, the costs and expenses incurred by the
Indemnified Party in connection with such defense, compromise or settlement as
and when such costs and expenses are so incurred.
12.5.4. Anything in this Section 12.5 to the contrary
notwithstanding, (a) if there is a reasonable possibility that Losses may
materially and adversely affect the Indemnified Party other than as a result of
money damages or other money payments, the Indemnified Party
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shall have the right, at its own cost and expense, to participate in the
defense, compromise or settlement of the Losses, (b) the Indemnifying Party
shall not, without the Indemnified Party's written consent, settle or
compromise any Losses or consent to entry of any judgment which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect
of such Losses in form and substance satisfactory to the Indemnified Party, and
(c) in the event that the Indemnifying Party undertakes defense of any Losses,
the Indemnified Party, by counsel or other representative of its own choosing
and at its sole cost and expense, shall have the right to consult with the
Indemnifying Party and its counsel or other representatives concerning such
Losses and the Indemnifying Party and the Indemnified Party and their
respective counsel or other representatives shall cooperate with respect to
such Losses and (d) in the event that the Indemnifying Party undertakes defense
of any Losses, the Indemnifying Party shall have an obligation to keep the
Indemnified Party informed of the status of the defense of such Losses and
furnish the Indemnified Party with all documents, instruments and information
that the Indemnified Party shall reasonably request in connection therewith.
12.6. CURE OF BREACH.
Notwithstanding any other provision of this Agreement to the contrary,
a breach by Sellers of any representations and warranties or a failure to
perform any covenant or agreement hereunder may be cured by Sellers prior to
the Transfer Date (a) by reducing the Purchase Price in an amount equal to the
Losses to Buyer caused by such breach, (b) by making payment to a third party
or taking other action to discharge the Losses, (c) by placing an amount equal
to the Losses in an escrow account under an escrow arrangement reasonably
satisfactory to Sellers and Buyer or (d) a combination of the foregoing. If
the foregoing actions fully cure the breach, Sellers shall have no obligation
under Section 12.2 or otherwise to indemnify Buyer with respect to the Losses
caused by such breach; if such actions partially cure the breach, Sellers shall
continue to have an obligation under Section 12.2 to indemnify Buyer with
respect to the remaining portion of the Losses caused by such breach.
ARTICLE 13.
TERMINATION
13.1. TERMINATION BY THE PARTIES.
This Agreement may be terminated at any time prior to the Closing by:
13.1.1. the mutual consent of Sellers and Buyer;
13.1.2. Sellers in accordance with, and subject to, the terms
and conditions of Section 14.1; and
13.1.3. Buyer if any loss or damage at a Station described in
Section 9.3 shall not have been cured within the sixty (60) day period
described in Section 9.3.
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13.1.4. Buyer if the closing of the Heritage Agreement with
respect to the Stations shall not have occurred on or prior to July 16, 1998.
13.2. AUTOMATIC TERMINATION.
This Agreement shall automatically terminate without further action by
the parties upon the termination of the Heritage Agreement in accordance with
its terms.
13.3. EFFECT OF TERMINATION.
13.3.1. In the event this Agreement is terminated as provided
in Sections 13.1.1, 13.1.3, 13.1.4 and 13.2, Buyer shall receive the immediate
return of the Letter of Credit, this Agreement shall be deemed null, void and
of no further force or effect, and the parties hereto shall be released from
all future obligations hereunder; provided, however, that the obligations of
Buyer and Sellers set forth in Sections 6.3 and 7.1 (which relate to
confidentiality), and Section 15.3 (which relates to payment of certain
expenses), shall survive such termination and the parties hereto shall have any
and all remedies to enforce such obligations provided at law or in equity or
otherwise (including, without limitation, specific performance).
13.3.2. In the event this Agreement is terminated as provided
in Section 13.1.2, this Agreement shall be deemed null, void and of no further
force or effect, and the parties hereto shall be released from all future
obligations hereunder; provided, however, that the obligations of Buyer and
Sellers set forth in Sections 6.3 and 7.1 (which relate to confidentiality),
Article 14 (which relates to remedies and the Letter of Credit) and Section
15.3 (which relates to payment of certain expenses), shall survive such
termination and the parties hereto shall have any and all remedies to enforce
such obligations provided at law or in equity or otherwise (including, without
limitation, specific performance).
ARTICLE 14.
REMEDIES
14.1. DEFAULT BY BUYER.
If Buyer shall default in the performance of its obligations under this
Agreement in any material respect and such default is not cured within thirty
(30) days after notice thereof (it being understood that Buyer shall have no
right to such thirty (30) day cure period with respect to a payment default
under Section 2.5), and provided that Sellers shall not then be in material
default in the performance of their obligations hereunder, Sellers shall be
entitled, by written notice to Buyer, to terminate this Agreement, and as the
sole and exclusive remedy of Sellers under this Agreement, to receive the
Deposit by drawing on the Letter of Credit in accordance with the terms of the
Deposit Escrow Agreement and the Letter of Credit (without
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set-off, deduction or counterclaim) as liquidated damages, and upon such
payment Buyer shall be discharged from all further liability under this
Agreement.
14.2. LIQUIDATED DAMAGES.
Sellers and Buyer have provided for the amount of the Deposit to be
liquidated damages as a remedy for Sellers after having considered carefully
the anticipated and actual harms and losses that would be incurred if Buyer
defaults and thus fails to perform its obligations to consummate the
transactions contemplated hereunder, the difficulty of ascertaining at this
time the actual amount of damages, special and general, that Sellers will
suffer in such event, and the inconvenience or nonfeasibility of otherwise
obtaining an adequate remedy in such event.
14.3. SPECIFIC PERFORMANCE.
Sellers acknowledge that the Assets to be sold and delivered to Buyer
pursuant to this Agreement are unique and that Buyer has no adequate remedy
at law if Sellers shall fail to perform any of their obligations hereunder, and
Sellers therefore confirm and agree that Buyer's right to specific performance
is essential to protect the rights and interests of Buyer. Accordingly, in
addition to any other remedies which Buyer may have hereunder or at law or in
equity or otherwise, Sellers hereby agree that Buyer shall have the right to
have all obligations, undertakings, agreements and other provisions of this
Agreement specifically performed by Sellers and that Buyer shall have the right
to obtain an order or decree of such specific performance in any of the courts
of the United States or of any state or other political subdivision thereof.
ARTICLE 15.
GENERAL PROVISIONS
15.1. ADDITIONAL ACTIONS, DOCUMENTS AND INFORMATION.
Buyer agrees that it will, at any time, prior to, at or after the
Transfer Date, take or cause to be taken such further actions, and execute,
deliver and file or cause to be executed, delivered and filed such further
documents and instruments and obtain such consents, as may be reasonably
requested by Sellers in connection with the consummation of the purchase and
sale contemplated by this Agreement. Sellers agree that they will, at any
time, prior to, at or after the Transfer Date, take or cause to be taken such
further actions, and execute, deliver and file or cause to be executed,
delivered and filed such further documents and instruments and obtain such
consents, as may be reasonably requested by Buyer in connection with the
consummation of the purchase and sale contemplated by this Agreement.
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15.2. BROKERS.
Each Seller represents to Buyer that such Seller has not engaged, or
incurred any unpaid liability (for any brokerage fees, finders' fees,
commissions or otherwise) to, any broker, finder or agent in connection with
the transactions contemplated by this Agreement; except for Salomon Smith
Barney (whose fee is the sole responsibility of Buyer), Buyer represents to
Sellers that Buyer has not engaged, or incurred any unpaid liability (for any
brokerage fees, finders' fees, commissions or otherwise) to, any broker, finder
or agent in connection with the transactions contemplated by this Agreement;
and Seller agrees to indemnify Buyer, and Buyer agrees to indemnify Sellers,
against any claims asserted against the other party for any such fees or
commissions by any person purporting to act or to have acted for or on behalf
of the indemnifying party. Notwithstanding any other provision of this
Agreement, this representation and warranty shall survive the Transfer Date
without limitation and shall not be subject to the Basket Amount contained in
Section 12.4.
15.3. EXPENSES AND TAXES.
Each party hereto shall pay its own expenses incurred in connection
with this Agreement and in the preparation for and consummation of the
transactions provided for herein. Notwithstanding the foregoing, Buyer, on the
one hand, and Sellers, on the other hand, shall each pay one-half of (a) all
sales (including, without limitation, bulk sales), use, documentary, stamp,
gross receipts, registration, transfer, conveyance, excise, recording, license
and other similar Taxes and fees ("Transfer Taxes") applicable to, imposed upon
or arising out of the sale by Sellers and the purchase by Buyer of the Assets
whether now in effect or hereinafter adopted and regardless of which party such
Transfer Tax is imposed upon (except for any Taxes incurred by Sellers from any
gain realized on the sale of the Assets hereunder, which Taxes shall be the
sole responsibility of Sellers), (b) any FCC filing fees incurred in connection
with the assignment of the FCC Licenses to Buyer, (c) any fees and expenses
incurred in connection with any HSR Filings, and (d) the fees and expenses of
Geraghty & Miller for the environmental site assessments performed on the Real
Property as disclosed on Schedule 3.16.
15.4. NOTICES.
All notices, demands, requests, or other communications which may be or
are required to be given or made by any party to any other party pursuant to
this Agreement shall be in writing and shall be hand delivered, mailed by
first-class registered or certified mail, return receipt requested, postage
prepaid, delivered by overnight air courier, or transmitted by telegram, telex,
or facsimile transmission addressed as follows:
If to Buyer:
STC Broadcasting, Inc.
3839 4th Street North
Suite 420
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St. Petersburg, Florida 33703
Attn: David Fitz
Fax: (813) 821-8092
with copies (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn: William S. Reyner, Jr., Esq.
Fax: (202) 637-5910
and to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr.
Fax: (214) 740-7355
If to any Seller:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: David D. Smith, President
Fax: (410) 467-5043
with copies (which shall not constitute notice) to:
Thomas & Libowitz, P.A.
100 Light Street, Suite 1100
Baltimore, Maryland 21202
Attn: Steven A. Thomas, Esq.
Fax: (410) 752-2046
and to:
Sinclair Communications, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: General Counsel
Fax: (410) 662-4707
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or such other address as the addressee may indicate by written notice to the
other parties.
Each notice, demand, request, or communication which shall be given or
made in the manner described above shall be deemed sufficiently given or made
for all purposes at such time as it is delivered to the addressee (with the
return receipt, the delivery receipt, the affidavit of messenger or (with
respect to a telex) the answerback being deemed conclusive but not exclusive
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
15.5. WAIVER.
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Agreement or under any other instrument or
document given in connection with or pursuant to this Agreement shall impair
any such right, power or privilege or be construed as a waiver of any default
or any acquiescence therein. No single or partial exercise of any such right,
power or privilege shall preclude the further exercise of such right, power or
privilege, or the exercise of any other right, power or privilege. No waiver
shall be valid against any party hereto unless made in writing and signed by
the party against whom enforcement of such waiver is sought and then only to
the extent expressly specified therein.
15.6. BENEFIT AND ASSIGNMENT.
15.6.1. No Seller shall assign this Agreement, in whole or in
part, whether by operation of law or otherwise, without the prior written
consent of Buyer and any purported assignment contrary to the terms hereof
shall be null, void and of no force and effect. The Buyer shall not assign
this Agreement, in whole or in part, whether by operation of law or otherwise,
without the prior written consent of Sellers and any purported assignment
contrary to the terms hereof shall be null, void and of no force and effect;
provided, however, Buyer shall be entitled, without the consent of Sellers, to
assign Buyer's rights and interests hereunder (in whole or in part as to any
Station) (a) prior to the Transfer Date, to any Person that directly or
indirectly is in control of, or is controlled by, or is under common control
with Buyer; further provided, however, that Buyer gives Seller written notice
thereof and such assignee shall be responsible for all representations,
covenants and agreements of Buyer hereunder as if such assignee was a party
hereto, and that any such assignment shall not relieve Buyer of any of its
Liabilities hereunder; and (b) from and after the Transfer Date, to any Person.
15.6.2. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns as permitted hereunder. No Person, other than the parties hereto and
their respective successors and assigns as permitted hereunder, is or shall be
entitled to bring any action to enforce any provision of this Agreement against
any of the parties hereto, and the covenants and agreements set forth in this
Agreement shall be solely for the benefit of, and shall be enforceable only by,
the parties hereto or their respective successors and assigns as permitted
hereunder.
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15.7. ENTIRE AGREEMENT; AMENDMENT.
This Agreement, including the Schedules and Exhibits hereto and the
other instruments and documents referred to herein or delivered pursuant
hereto, contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written agreements,
commitments or understandings with respect to such matters. No amendment,
modification or discharge of this Agreement shall be valid or binding unless
set forth in writing and duly executed by each of the parties hereto.
15.8. SEVERABILITY.
If any part of any provision of this Agreement or any other contract,
agreement, document or writing given pursuant to or in connection with this
Agreement shall be invalid or unenforceable under applicable law, such part
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provisions or the
remaining provisions of said contract, agreement, document or writing.
15.9. HEADINGS.
The headings of the sections and subsections contained in this
Agreement are inserted for convenience only and do not form a part or affect
the meaning, construction or scope thereof.
15.10. GOVERNING LAW.
This Agreement, the rights and obligations of the parties hereto, and
any claims or disputes relating thereto, shall be governed by and construed
under and in accordance with the laws of the State of New York, excluding the
choice of law rules thereof.
15.11. SIGNATURE IN COUNTERPARTS.
This Agreement may be executed in separate counterparts, none of which
need contain the signatures of all parties, each of which shall be deemed to be
an original, and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
-51-
<PAGE> 60
IN WITNESS WHEREOF, each of the parties hereto has executed this Asset
Purchase Agreement, or has caused this Asset Purchase Agreement to be duly
executed and delivered in its name on its behalf, all as of the day and year
first above written.
STC BROADCASTING OF VERMONT, INC.
By:/s/ David A. Fitz
--------------------------------
Name: David A. Fitz
Title: Chief Financial Officer
TUSCALOOSA BROADCASTING, INC.
By:/s/ David B. Amy
--------------------------------
Name: David B. Amy
Title: Treasurer and Secretary
WPTZ LICENSEE, INC.
By:/s/ David B. Amy
--------------------------------
Name: David B. Amy
Title: Treasurer and Secretary
WNNE LICENSEE, INC.
By:/s/ David B. Amy
--------------------------------
Name: David B. Amy
Title: Treasurer and Secretary
<PAGE> 61
ANNEX I
DEFINITIONS
"ACCOUNTING FIRM" shall have the meaning set forth in Section 2.6.2.
"ACCOUNTS RECEIVABLE" means all cash accounts receivable with respect
to the Stations as of the end of the broadcast day immediately preceding the
Transfer Date.
"ADDITIONAL AGREEMENTS" shall have the meaning set forth in Section
6.1.6(a).
"AFFILIATE" shall mean, with respect to any Person, any other Person
that, (a) directly or indirectly is in control of, is controlled by, or is
under common control with, the first Person, (b) is an officer, director,
trustee, partner (general or limited), employee or holder of five percent (5%)
or more of any class of any voting or non-voting securities or other equity in
the first Person, (c) is an officer, director, trustee, partner (general or
limited), employee or holder of five percent (5%) or more of any class of the
voting or non-voting securities or other equity in any Person which directly or
indirectly is in control of, is controlled by, or is under common control with,
the first Person, and (d) any Family of any individual included in (a), (b) or
(c). For purposes of this definition, "control" (including with correlative
meanings "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of either (X) five percent (5%) or more of
the voting power of the securities having ordinary voting power for the
election of directors of the first Person, or (Y) the power to direct or cause
the direction of the management or policies of the first Person (whether
through ownership of securities, partnership interests or any other ownership
or debt interests, by contract or otherwise).
"AGREEMENT" shall have the meaning set forth in the Preamble.
"APPLICANT" shall have the meaning set forth in Section 4.5.2.
"ASSETS" shall have the meaning set forth in Section 2.1.
"ASSIGNMENT OF CONTRACTS AND LEASES" means that certain Assignment of
Contracts and Leases, dated as of the Transfer Date and executed by Sellers,
substantially in the form attached hereto as Exhibit C.
"ASSIGNMENT OF FCC LICENSES" means that certain Assignment of FCC
Licenses, dated as of the Closing Date and executed by Sellers, substantially
in the form attached hereto as Exhibit B.
"ASSUMED LIABILITIES" mean the Liabilities assumed by Buyer pursuant to
Section 2.8.
"ASSUMPTION AGREEMENT" means that certain Assumption Agreement, dated
the Transfer Date and executed by Buyer and Sellers, substantially in the form
attached hereto as Exhibit D.
<PAGE> 62
"BALANCE SHEET" shall have the meaning set forth in Section 3.5.1.
"BASE PURCHASE PRICE" shall have the meaning set forth in Section 2.4.
"BASKET AMOUNT" shall have the meaning set forth in Section 12.4.2.
"BENEFIT ARRANGEMENT" means any benefit arrangement, obligation, custom,
or practice, whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present or former directors,
employees, agents, or independent contractors, other than any obligation,
arrangement, custom or practice that is a Plan, including, without limitation,
employment agreements, executive compensation arrangements, incentive programs
or arrangements, sick leave, vacation pay, plant closing benefits, salary
continuation for disability, consulting, or other compensation arrangements,
workers' compensation, retirement, deferred compensation, bonus, stock option or
purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, perquisite, company cars, any plans
subject to Code Section 125, and any plans providing benefits or payments in the
event of a change of control, change in ownership, or sale of a substantial
portion (including all or substantially all) of the assets of any business or
portion thereof, in each case with respect to any present or former employees,
directors, or agents.
"BENEFIT PLANS" shall have the meaning set forth in Section 3.14.1.
"BILL OF SALE" means that certain Bill of Sale and Assignment of
Assets, dated as of the Transfer Date and executed by Sellers, substantially
in the form attached hereto as Exhibit A.
"BUYER DOCUMENTS" shall mean, collectively, this Agreement, the Deposit
Escrow Agreement, the Assumption Agreement and the TBA Agreement.
"BUYER'S PLAN" shall have the meaning set forth in Section 8.4.5.
"CLOSING" shall have the meaning set forth in Section 11.1.1.
"CLOSING DATE" shall have the meaning set forth in Section 11.1.1.
"CODE" means the Internal Revenue Code of 1986, as amended, and all
Laws promulgated pursuant thereto or in connection therewith.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended.
"CURRENT BALANCE SHEET DATE" shall have the meaning set forth in
Section 3.5.2.
"DEFERRED CONTRACT" shall have the meaning set forth in Section
6.2.10(b).
"DEPOSIT" shall have the meaning set forth in Section 2.3.
ANNEX I-2
<PAGE> 63
"DEPOSIT ESCROW AGENT" means George Mason Bank.
"DEPOSIT ESCROW AGREEMENT" means that certain Escrow Agreement dated as
of the date hereof by and among Buyer, Sellers and the Deposit Escrow Agent.
"DESIGNATED PROPERTIES" shall have the meaning set forth in Section
6.2.10(b).
"DMA" means the designated market area for a particular television or
radio station as determined by the A.C. Nielsen Co.
"ENCUMBRANCES" mean any mortgages, pledges, liens, security interests,
defects in title, easements, rights-of-way, encumbrances, restrictions and any
other matters affecting title.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, ("CERCLA") as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section 9601 et
seq.; the Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1802 et
seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section
9601 et seq.; the Clean Water Act ("CWA"), 33 U.S.C. Section 1251 et seq.; the
Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; the Clean Air Act
("CAA"), 42 U.S.C. Section 7401 et seq.; or any other applicable federal,
state, or local laws relating to Hazardous Materials generation, production,
use, storage, treatment, transportation or disposal, or the protection of the
environment from Hazardous Materials
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"ERISA AFFILIATE" means any person that, together with any Seller
Party, would be or was prior to March 17, 1997 treated as a single employer
under Section 414 of the Code or Section 4001 of ERISA.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 2.2.
"FAMILY" of an individual includes (a) the individual, (b) the
individual's spouse and former spouses and any other natural person who resides
with such individual, (c) any other natural person who is related to the
individual or any person described in the preceding clause (b) within the
second degree.
"FCC" means the Federal Communications Commission.
"FCC APPLICATIONS" shall have the meaning set forth in Section 5.1.
"FCC LICENSES" shall have the meaning set forth in Section 2.1.1.
ANNEX I-3
<PAGE> 64
"FCC ORDER" means an order or orders of the FCC, or of the Chief, Mass
Media Bureau of the FCC, acting under delegated authority, consenting to the
assignment to Buyer of the FCC Licenses for the Stations.
"FINAL PRORATION AMOUNT" shall have the meaning set forth in Section
2.6.2.
"GOVERNMENTAL AUTHORITY" means any agency, board, bureau, court,
commission, department, instrumentality or administration of the United States
government, any foreign government, any state government or any local or other
governmental body in a state, territory or possession of the United States or
the District of Columbia.
"HART-SCOTT-RODINO" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and all Laws promulgated pursuant thereto
or in connection therewith.
"HAZARDOUS MATERIALS" means any wastes, substances, or materials
(whether solids, liquids or gases) that are deemed hazardous, toxic,
pollutants, or contaminants, including without limitation, substances defined
as "hazardous wastes," "hazardous substances," "toxic substances," "radioactive
materials," or other similar designations in, or otherwise subject to
regulation under, any Environmental Laws.
"HERITAGE SUBSIDIARIES" shall have the meaning set forth in the
Recitals.
"HERITAGE AGREEMENT" shall have the meaning set forth in the Recitals.
"HMSI" shall have the meaning set forth in the Recitals.
"HSR FILING" shall have the meaning set forth in Section 5.2.
"INDEMNITY CAP" shall have the meaning set forth in Section 12.4.2.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the respective
meanings set forth in Section 12.5.1.
"INTELLECTUAL PROPERTY" shall have the meaning set forth in Section
2.1.4.
"LAWS" means any federal, state or local law, foreign law, statute,
code, ordinance, regulation, order, writ, injunction, judgment or decree
applicable to the specified Person and to the businesses and assets thereof.
"LEASED PROPERTY" shall have the meaning set forth in Section 2.1.2(b).
"LETTER OF CREDIT" shall have the meaning set forth in Section 2.3.
"LIABILITIES" shall mean, as to any Person, all debts, adverse claims,
liabilities and obligations, direct, indirect, absolute or contingent of such
Person, whether accrued, vested or otherwise, whether in contract, tort, strict
liability or otherwise and whether or not actually
ANNEX I-4
<PAGE> 65
reflected, or required by generally accepted accounting principles to be
reflected, in such Person's balance sheets or other books and records.
"LICENSE ASSETS" shall mean the FCC Licenses and the other Assets
described on Schedule I hereto.
"LMA" means any time brokerage agreement, local marketing arrangement,
joint sales agreement, joint operating agreement, limited management agreement
or other similar agreement or contract.
"LOSSES" means any and all demands, claims, complaints, actions or
causes of action, suits, proceedings, investigations, arbitrations,
assessments, losses, damages, liabilities, obligations (including those arising
out of any action, such as any settlement or compromise thereof or judgment or
award therein) and any costs and expenses, including, without limitation,
reasonable attorneys' fees and disbursements.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, assets or financial condition of the Stations taken as a whole,
except for any such material adverse effect resulting from (a) general economic
conditions applicable to the television broadcast industry, (b) general
conditions in the markets in which the Stations operate, (c) circumstances that
are not likely to recur and either have been substantially remedied or can be
substantially remedied without substantial cost or delay, or (d) the refusal by
Buyer to consent to any new Program Contract.
"MULTIEMPLOYER PLAN" means any Plan described in Section 3(37) of
ERISA.
"NETWORK AGREEMENT" shall have the meaning set forth in Section 2.1.8.
"NON-LICENSE ASSETS" shall mean the Assets, other than the License
Assets.
"NON-LICENSE TRANSFER" shall have the meaning set forth in Section
11.2.1.
"NON-LICENSE TRANSFER DATE" shall have the meaning set forth in Section
11.2.1.
"OPERATING CONTRACTS" shall have the meaning set forth in Section
2.1.9.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business of
the Stations consistent with past practices of the Heritage Subsidiaries both
with respect to type and amount; any actions taken pursuant to the requirements
of law or contracts existing on the date hereof shall be deemed to be action in
the Ordinary Course of Business.
"OUTSIDE DATE" shall have the meaning set forth in Section 11.2.1.
"PERMITTED ENCUMBRANCES" means (a) Encumbrances of a landlord, or other
statutory lien not yet due and payable, or a landlord's liens arising in the
Ordinary Course of Business, (b) Encumbrances arising in connection with
equipment or maintenance financing or
ANNEX I-5
<PAGE> 66
leasing under the terms of the Station Contracts set forth on the Schedules
which have been made available to Buyer, (c) Encumbrances arising pursuant to
the terms of leases on Real Property or Leased Property as set forth on
Schedule 2.1.1 and Schedule 2.1.9 which are subject to any lease or sublease to
a third party, (d) Encumbrances for Taxes not yet due and payable or which are
being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on Seller's books in accordance
with generally accepted accounting principles, (e) Encumbrances that do not
materially detract from the value of any of the Assets or materially interfere
with the use thereof as currently used, or (f) those Encumbrances on Schedule
3.8.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization, other form
of business or legal entity or Governmental Authority.
"PLAN" means any plan, program or arrangement, whether or not written,
that is or was an "employee benefit plan" as such term is defined in Section
3(3) of ERISA and (a) which was or is established or maintained by any Seller
Party or any ERISA Affiliate for the benefit of any current or former employees
of the Stations; (b) to which any Seller Party contributed or was obligated to
contribute or to fund or provide benefits or had any liability (whether actual
or contingent) with respect to any of its assets or otherwise for the benefit
of any current or former employees of the Stations; or (c) which provides or
promises benefits to any person who performs or who has performed services for
the Stations and because of those services is or has been (i) a participant
therein or (ii) entitled to benefits thereunder.
"PROGRAM CONTRACTS" shall have the meaning set forth in Section 2.1.5.
"PRORATION AMOUNT" shall have the meaning set forth in Section 2.6.1.
"PRORATION ITEMS" shall mean any power and utility charges, business
and license fees (including retroactive adjustments thereof), sales and
service charges, commissions, special assessments, and rental payments and
personal and real estate Taxes and assessments with respect to the Real
Property, taxes (except for Taxes arising from the transfer of the Assets
hereunder), deposits, Trade-out Agreements, accrued vacation, unused sick leave
and other similar prepaid and deferred items and any other operating expenses
incurred in the Ordinary Course of Business (except with respect to Program
Contracts, only those payments due and payable during the month in which the
Transfer Date occurs shall be prorated). The parties acknowledge and agree that
there shall be excluded from Proration Items the following: (a) severance pay
relating to any employee of any Seller who shall have been terminated prior to
the Transfer Date, and (b) any Liabilities not being assumed by Buyer in
accordance with Section 2.8.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.4.
"QUALIFIED PLAN" means a Plan that satisfies, or is intended by any
Seller Party to satisfy, the requirements for tax qualification described in
Section 401 of the Code including,
ANNEX I-6
<PAGE> 67
without limitation, any Plan that was terminated on or after July 1, 1989, as
to which any Seller Party may have any actual or contingent liability.
"REAL PROPERTY" shall have the meaning set forth in Section 2.1.2(a).
"RESTRICTED CONTRACTS" shall have the meaning set forth in Section
6.2.10(a).
"SCHEDULES" shall mean the disclosure schedules delivered by Seller to
Buyer in connection herewith.
"SELLER DOCUMENTS" shall mean, collectively, this Agreement, the
Deposit Escrow Agreement, the Assignment of Contracts and Leases, the Bill of
Sale, the Assignment of FCC Licenses, the Assumption Agreement and the TBA
Agreement.
"SELLER PARTIES" shall mean, collectively, Sellers, HMC and the
Heritage Subsidiaries.
"SELLER TAX RETURNS" means all federal, state, local, foreign and other
applicable Tax returns, declarations of estimated Tax reports required to be
filed by any Seller or any of the Heritage Subsidiaries in connection with the
business and operations of the Stations (without regard to extensions of time
permitted by law or otherwise).
"SELLERS' PLAN" shall have the meaning set forth in Section 8.4.5.
"STATION" and "STATIONS" shall have the meaning set forth in the
Recitals.
"STATION CONTRACTS" shall have the meaning set forth in Section 2.1.9.
"STC" shall have the meaning set forth in the Recitals.
"TAXES" means all federal, state and local taxes (including, without
limitation, income, profit, franchise, sales, use, real property, personal
property, ad valorem, excise, employment, social security and wage withholding
taxes) and installments of estimated taxes, assessments, deficiencies, levies,
imports, duties, license fees, registration fees, withholdings, or other
similar charges of every kind, character or description imposed by any
Governmental Authorities.
"TBA AGREEMENT" shall have the meaning set forth in Section 8.9.
"THIRD PARTY SALE" shall have the meaning set forth in Section 11.1.3.
"TIME SALES AGREEMENTS" shall have the meaning set forth in Section
2.1.7.
"TRADE-OUT AGREEMENTS" shall have the meaning set forth in Section
2.1.6.
ANNEX I-7
<PAGE> 68
"TRANSFER DATE" shall mean the earlier of the Non-License Transfer Date
or the Closing Date.
"TRANSFER TAXES" shall have the meaning set forth in Section 15.3.
"TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section
8.4.1.
"TRANSMISSION DEFECT" shall have the meaning set forth in Section 9.2.
"TRUSTEE" shall have the meaning set forth in the Recitals.
"WELFARE PLAN" means an "employee welfare benefit plan" as such term is
defined in Section 3(1) of ERISA.
"WFFF" shall have the meaning set forth in the Recitals.
"WNNE" shall have the meaning set forth in the Recitals.
"WPTZ" shall have the meaning set forth in the Recitals.
ANNEX I-8
<PAGE> 1
Exhibit 2.7
ASSET EXCHANGE AGREEMENT
BY AND AMONG
STC BROADCASTING, INC.,
STC BROADCASTING OF VERMONT, INC.,
STC LICENSE COMPANY
STC BROADCASTING OF VERMONT SUBSIDIARY, INC.
AND
HEARST-ARGYLE STATIONS, INC.
DATED AS OF FEBRUARY 18, 1998
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS AND REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 2. EXCHANGE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1. Transfer by the STC Exchange Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2. Transfer by HAT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3. Description of the Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3.1. FCC Licenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3.2. Real and Leased Property Interests.. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3.3. Tangible Personal Property.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3.4. Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3.5. Program Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3.6. Trade-out Agreements.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3.7. Broadcast Time Sales Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3.8. Network Affiliation Agreements.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3.9. Operating Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3.10. Vehicles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3.11. Files and Records.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3.12. Auxiliary Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3.13. Permits and Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3.14. Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3.15. Certain Accounts Receivable.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3.16. Rights Under the Sinclair Documents.. . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3.17. Certain Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4. Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4.1. Cash.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4.2. Certain Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4.3. Personal Property Disposed Of. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4.4. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4.5. Employee Plans and Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4.6. Right to Tax Refunds.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4.7. Certain Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4.8. Third-Party Claims.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4.9. Rights Under this Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4.10. Rights Under the HAT Merger Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4.11. Names.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4.12. Deposit and Prepaid Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4.13. Shared Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4.14. Labor Union Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4.15. Miscellaneous Excluded Assets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
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TABLE OF CONTENTS (continued)
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2.4.16. Affiliated Transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4.17. Assets of Other Television Stations.. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5. Exchange of Assets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6. Proration Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7. Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.8. Allocation of Asset Values.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.9. Assumption of Liabilities by STC.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.10. Assumption of Liabilities by HAT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.11. Matters Related to the Burlington Stations. . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.12. Matters Related to the Providence Stations. . . . . . . . . . . . . . . . . . . . . . . . . 16
2.13 Financing of Burlington Stations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.14. Working Capital.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 3. REPRESENTATIONS AND WARRANTIES BY THE STC PARTIES. . . . . . . . . . . . . . . . . . . . . 18
3.1. Organization and Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2. Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.3. Compliance with Laws.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4. Consents and Approvals; No Conflicts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.5. Financial Statements; Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 19
3.6. Absence of Certain Changes or Events.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.7. Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.8. Assets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.9. FCC Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.10. Real Property.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.11. Intellectual Property.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.12. Station Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.13. Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.14. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.15. Labor Relations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.16. Environmental Matters.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.17. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.18. Reports.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.19. Affiliated Transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.20. Special Purpose.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.21. Availability of Funds.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY HAT. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.1. Organization and Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.2. Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.3. Compliance with Laws.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.4. Consents and Approvals; No Conflicts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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4.5. Financial Statements; Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 29
4.6. Absence of Certain Changes or Events.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.7. Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.8. Assets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.9. FCC Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.10. Real Property.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.11. Intellectual Property.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.12. Station Contracts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.13. Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.14. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.15. Labor Relations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.16. Environmental Matters.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.17. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.18. Reports.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.19. Affiliated Transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 5. PRE-CLOSING FILINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.1. Applications for FCC Consent.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.2. Hart-Scott-Rodino. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.3. Non-Required Actions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 6. COVENANTS AND AGREEMENTS OF THE PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . 38
6.1. Negative Covenants.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.1.1. Dispositions; Mergers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.1.2. Accounting Principles and Practices. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.1.3. Trade-out Agreements.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.1.4. Broadcast Time Sales Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.1.5. Network Affiliation Agreements and TBAs. . . . . . . . . . . . . . . . . . . . . . . . . 39
6.1.6. Additional Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.1.7. Breaches.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.1.8. Employee Matters.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.1.9. Actions Affecting FCC Licenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.1.10. Programming.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.1.11. Encumbrances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.1.12. Transactions With Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.2. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.2.1. Preserve Existence.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.2.2. Normal Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.2.3. Maintain FCC Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.2.4. Network Affiliation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.2.5. Station Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.2.6. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
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6.2.7. Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.2.8. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2.9. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2.10. Consents.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2.11. Corporate Action.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.2.12. Environmental Audit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.2.13. Sinclair Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.3. Confidentiality.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.4. Collection of Receivables.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.5. Possession and Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.6. Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.7. Public Announcements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.8. Sinclair Employee Matters.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.9. Other Employee Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.10. Disclosure Schedules.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.11. Bulk Sales Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.12. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.13. Preservation of Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.14. Affiliated Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.15. Clear Channel Agreements.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.16. Sinclair Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.17. Environmental Remediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.18 Certain FCC Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF STC. . . . . . . . . . . . . . . . . . . . . . . . 52
7.1. Closing Under the Sinclair Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.2. Representations and Covenants.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.3. Delivery of Documents.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.4 Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.5 ABC Affiliation Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.6. FCC Order.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.7. Hart-Scott-Rodino.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.8. Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF HAT. . . . . . . . . . . . . . . . . . . . . . 54
8.1. Closing Under the Sinclair Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.2. Representations and Covenants.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.3. Delivery of Documents.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.4. Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.5. FCC Order.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.6. Hart-Scott-Rodino.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.7. Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
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TABLE OF CONTENTS (continued)
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8.8. LKE Facilitation Transactions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 9. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.1. Closing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.2. Time and Place of Closing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.3. Delivery by STC at the Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.3.1. Agreements and Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.3.2. Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.3.3. Certified Resolutions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.3.4. Officers' Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.3.5. Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.4. Delivery by HAT at the Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.4.1. Agreements and Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.4.2. Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.4.3. Certified Resolutions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.4.4. Officers' Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.4.5. Good Standing Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 10. SURVIVAL; INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.1. Survival of Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.2. Indemnification by STC.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.3. Indemnification by HAT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.4. Limitations on Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.5. Conditions of Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.6. Special Tax Indemnification by HAT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.7. Cure of Breach.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 11. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.1. Termination of Exchange by the Parties.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.2. Termination of Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.3. Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE 12. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.1. Additional Actions, Documents and Information. . . . . . . . . . . . . . . . . . . . . . . . . 65
12.2. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.3. Expenses and Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
12.5. Waiver.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.6. Benefit and Assignment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.7. Entire Agreement; Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.8. Severability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
12.9. Headings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.10. Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
12.11. Signature in Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
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SCHEDULES
<TABLE>
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Schedule 2.3.1 FCC Licenses
Schedule 2.3.2 Real Property Interests
Schedule 2.3.3 Tangible Personal Property
Schedule 2.3.4 Intellectual Property
Schedule 2.3.5 Program Contracts
Schedule 2.3.6 Trade-out Agreements
Schedule 2.3.8 Network Affiliation Agreements
Schedule 2.3.9 Other Operating Contracts
Schedule 2.3.10 Vehicles
Schedule 2.3.12 Auxiliary Facilities
Schedule 2.3.14 Accounts Receivable
Schedule 2.4.13 Shared Contracts
Schedule 2.4.14 Labor Union Contracts
Schedule 2.4.15 Excluded Assets
Schedule 2.4.16 Affiliated Transactions
Schedule 2.12 WNAC/WPRI Assets
Schedule 3.4 STC Consents
Schedule 3.5 STC Financial Statements
Schedule 3.6 STC Absence of Certain Changes or Events
Schedule 3.7 STC Litigation
Schedule 3.8 STC Encumbrances on Assets
Schedule 3.9 STC FCC Matters
Schedule 3.10 STC Real Property and Encumbrances
Schedule 3.14 STC Employee Benefit Plans
Schedule 3.15 STC Employee Matters
Schedule 3.16 STC Environmental Matters
</TABLE>
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Schedule 3.17 STC Insurance
Schedule 3.19 STC Affiliated Transactions
Schedule 4.4 HAT Consents
Schedule 4.6 HAT Absence of Certain Changes or Events
Schedule 4.7 HAT Litigation
Schedule 4.8 HAT Encumbrances on Assets
Schedule 4.9 HAT FCC Matters
Schedule 4.10 HAT Real Property and Encumbrances
Schedule 4.14 HAT Employee Benefit Plans
Schedule 4.15 HAT Employee Matters
Schedule 4.16 HAT Environmental Matters
Schedule 4.17 HAT Insurance
Schedule 4.19 HAT Affiliated Transactions
Schedule 12.2 Brokers
</TABLE>
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EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Form of Bill of Sale and Assignment of Assets
EXHIBIT B Form of Assignment of FCC Licenses
EXHIBIT C Form of Assignment of Contracts and Leases
EXHIBIT D Form of Assumption Agreement
EXHIBIT E Form of Credit Facilities
</TABLE>
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<PAGE> 10
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT (this "Agreement") is entered into as of
this 18th day of February, 1998, by and among STC BROADCASTING, INC., a Delaware
corporation ("STC Broadcasting"), STC BROADCASTING OF VERMONT, INC., a Delaware
corporation and a wholly-owned subsidiary of STC Broadcasting ("STCBV"), STC
LICENSE COMPANY, a Delaware corporation and wholly-owned subsidiary of STC
Broadcasting ("STC License Company"), and STC BROADCASTING OF VERMONT
SUBSIDIARY, INC., a Delaware corporation and wholly-owned subsidiary of STCBV
("STCBV Sub") (STC Broadcasting, STCBV, STC License Company and STCBV Sub are
sometimes individually referred to herein as a "STC Party" and collectively
referred to herein as "STC" or the "STC Parties"), and HEARST-ARGYLE STATIONS,
INC., a Nevada corporation ("HAT").
WHEREAS, pursuant to an Asset Purchase Agreement dated as of July 16,
1997 (the "Heritage Agreement"), by and among Sinclair Broadcast Group, Inc., a
Maryland corporation ("Sinclair Parent"), and certain indirect subsidiaries (the
"Heritage Subsidiaries") of Heritage Media Corporation, a Delaware corporation
("HMC"), Sinclair has agreed to buy, and the Heritage Subsidiaries have agreed
to sell, certain broadcast stations owned, controlled or operated by the
Heritage Subsidiaries, including (i) television broadcast station WPTZ (TV),
Channel 5, North Pole, New York ("WPTZ"); (ii) certain assets and rights
relating to television broadcast station WFFF-TV, Channel 44, Burlington,
Vermont ("WFFF"); and (iii) television broadcast station WNNE (TV), Channel 31,
Hartford, Vermont ("WNNE") (WPTZ, WFFF and WNNE are collectively referred to
herein as the "Burlington Stations");
WHEREAS, STCBV and Tuscaloosa Broadcasting, Inc., a Maryland corporation
("Tuscaloosa"), WPTZ Licensee, Inc., a Maryland corporation ("WPTZ Licensee"),
and WNNE Licensee, Inc., a Maryland corporation ("WNNE Licensee") (Tuscaloosa,
WPTZ Licensee and WNNE Licensee are collectively referred to herein as
"Sinclair") have as of February 3, 1998, entered into an Asset Purchase
Agreement (the "Sinclair Agreement") pursuant to which STCBV has agreed to buy,
and Sinclair has agreed to sell, the assets of the Burlington Stations, all
subject to the terms described in the Sinclair Agreement;
WHEREAS, prior to any closing under the Sinclair Agreement, STCBV
intends to assign to STCBV Sub all of STCBV's rights under the Sinclair
Documents to acquire the Assets (as defined in the Sinclair Agreement);
WHEREAS, STC License Company is the licensee of television broadcast
station KSBW (TV), Channel 8, Salinas, California ("KSBW"), pursuant to certain
authorizations issued by the FCC, and STC Broadcasting operates KSBW and owns or
leases certain assets used in connection with the operation of KSBW (KSBW, WPTZ
and WNNE are collectively referred to herein as the "STC Stations");
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WHEREAS, HAT is the licensee of television broadcast station WDTN (TV),
Channel 2, Dayton, Ohio ("WDTN"), pursuant to certain authorizations issued by
the FCC, and HAT operates WDTN and owns or leases certain assets used in
connection with the operation of WDTN;
WHEREAS, HAT (as successor-in-interest to WNAC Argyle Television, Inc.,
a Nevada corporation ("WNAC Argyle")) is the licensee of television broadcast
station WNAC (TV), Channel 64, Providence, Rhode Island ("WNAC"), pursuant to
certain authorizations issued by the FCC (WDTN and WNAC are collectively
referred to herein as the "HAT Stations") (the STC Stations and the HAT Stations
are sometimes each individually referred to herein as a "Station");
WHEREAS, Clear Channel Television License, Inc. is the licensee of
WPRI-TV, Channel 12, Providence, Rhode Island ("WPRI"), pursuant to certain
authorizations issued by the FCC;
WHEREAS, pursuant to a Joint Marketing and Programming Agreement dated
as of June 10, 1996, and a Reciprocal Right of First Refusal dated as of June
10, 1996 (collectively, the "Clear Channel Agreements"), both between Clear
Channel Television, Inc. ("Clear Channel") and HAT (as successor-in-interest to
WNAC Argyle and Providence Argyle Television, Inc., a Delaware corporation),
each of HAT and Clear Channel have certain rights and obligations regarding WNAC
and WPRI;
WHEREAS, STC desires to assign, transfer and convey to HAT all of STC's
right, title and interest in the assets of the STC Stations, and HAT desires to
assign, transfer and convey to STC all of HAT's right, title and interest in the
Clear Channel Agreements and the assets of the HAT Stations, all subject to the
terms and conditions described in this Agreement;
WHEREAS, the parties hereto intend that certain of the conveyances
contemplated by this Agreement shall constitute a "like-kind exchange" (the
"Like-Kind Exchange") and that certain of the transactions hereunder shall
qualify as such for nonrecognition of income under Section 1031 of the Code; and
WHEREAS, in order to facilitate the Like-Kind Exchange, immediately
prior to or at the Closing hereunder, STC shall take such actions in order that
all of the FCC Licenses of the STC Stations shall be held by STC License Company
and all other Assets of STC shall be held by STC Broadcasting as contemplated by
Section 8.8 (after the consummation of any such actions, "STC Broadcasting and
"STC License Company" are sometimes referred to herein as the "STC Exchange
Entities").
WHEREAS, pursuant to a guaranty given as of the date hereof by
Hearst-Argyle Television, Inc., a Delaware corporation ("H-A"), H-A has
guaranteed to STC the prompt and complete performance of the obligations of HAT
arising under or pursuant to this Agreement.
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NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE 1.
DEFINITIONS AND REFERENCES
Capitalized terms used herein without definition shall have the
respective meanings assigned thereto in Annex I attached hereto and incorporated
herein for all purposes of this Agreement (such definitions to be equally
applicable to both the singular and plural forms of the terms defined). Unless
otherwise specified, all references herein to "Articles" or "Sections" are to
Articles or Sections of this Agreement.
ARTICLE 2.
EXCHANGE OF ASSETS
2.1. TRANSFER BY THE STC EXCHANGE ENTITIES.
Subject to the terms and conditions hereof and in reliance upon the
representations, warranties and agreements contained herein, (a) STC
Broadcasting shall assign, transfer, convey and deliver to HAT free and clear of
any Encumbrances other than Permitted Encumbrances, and HAT shall acquire and
accept from STC Broadcasting all right, title and interest of STC Broadcasting
in, to and under all real, personal and mixed assets, rights, benefits and
privileges, both tangible and intangible, owned, leased, used or useful by STC
Broadcasting in connection with the business and operations of the STC Stations
other than the STC License Assets (collectively, the "STC Non-License Assets");
and (b) STC License Company shall assign, transfer, convey and deliver to HAT
free and clear of any Encumbrances other than Permitted Encumbrances, and HAT
shall acquire and accept from STC License Company, all right, title and interest
of STC License Company in, to and under all STC License Assets (the STC
Non-License Assets and the STC License Assets are collectively referred to
herein as the "STC Assets"). The STC Assets shall exclude the STC Excluded
Assets described in Section 2.4.
2.2. TRANSFER BY HAT.
Subject to the terms and conditions hereof and in reliance upon the
representations, warranties and agreements contained herein, (a) HAT shall
assign, transfer, convey and deliver to STC Broadcasting free and clear of any
Encumbrances other than Permitted Encumbrances, and STC Broadcasting shall
acquire and accept from HAT, all right, title and interest of HAT in, to and
under all real, personal and mixed assets, rights, benefits and privileges, both
tangible and intangible, owned, leased, used or useful by HAT in connection with
the business and operations of the HAT Stations other than the HAT License
Assets (collectively, the "HAT Non-License Assets"); and (b) HAT shall assign,
transfer, convey and deliver to STC License Company (and in the case of the FCC
Licenses for WNAC, for
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assignment, transfer, conveyance and delivery by STC License Company immediately
thereafter on the Closing Date to Smith Acquisition License Company, a Delaware
corporation ultimately controlled by Robert N. Smith ("SALC")) free and clear of
any Encumbrances other than Permitted Encumbrances, and STC License Company
shall acquire and accept from HAT, all right, title and interest of HAT in, to
and under all HAT License Assets (the HAT License Assets and the HAT Non-License
Assets are collectively referred to herein as the "HAT Assets") (the STC Assets
and the HAT Assets are sometimes each individually referred to herein as
"Assets"). The HAT Assets shall exclude the HAT Excluded Assets described in
Section 2.4.
2.3. DESCRIPTION OF THE ASSETS.
The Assets for each Station shall include, without limitation, all of
the right, title and interest of the party transferring such Assets in, to and
under the items described below. The party transferring Assets is sometimes
referred to herein as the "Transferring Party"; and the party acquiring and
accepting Assets from the Transferring Party is sometimes referred to herein as
the "Recipient Party".
2.3.1. FCC LICENSES.
All licenses, permits and other authorizations issued by the FCC for the
operation of the Stations of the Transferring Party (the "FCC Licenses"),
including without limitation those listed in Schedule 2.3.1, and all
applications therefor, together with any renewals, extensions or modifications
thereof and additions thereto.
2.3.2. REAL AND LEASED PROPERTY INTERESTS.
(a) All the real property, including, without
limitation, all land, fee interests, easements and other interests of every kind
and description in real property, buildings, structures, fixtures,
appurtenances, towers and antennae, and other improvements thereon owned by the
Transferring Party and used or useful in connection with the business and
operations of its Stations ("Real Property"), including, without limitation, all
of those items listed in Schedule 2.3.2.
(b) All the real property leasehold interests,
including, without limitation, leases and subleases of any land, easements and
other real property leasehold interests of every kind and description in
real property, buildings, structures, fixtures, appurtenances, towers and
antennae, and other improvements thereon leased by the Transferring Party in
connection with the business and operations of its Stations ("Leased Property"),
including, without limitation, all of those items listed in Schedule 2.3.2.
2.3.3. TANGIBLE PERSONAL PROPERTY.
All of the furniture, fixtures, furnishings, machinery, computers,
equipment, inventory, spare parts, supplies, office materials and other
tangible property of every kind and description owned, leased or used by the
Transferring Party in connection with the
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<PAGE> 14
business and operations of its Stations, together with any replacements thereof
and additions thereto made before the Closing Date, and less any retirements or
dispositions thereof made before the Closing Date in the Ordinary Course of
Business, including, without limitation, those items which have a book value in
excess of Five Thousand Dollars ($5,000), all of which are set forth and
identified in Schedule 2.3.3.
2.3.4. INTELLECTUAL PROPERTY.
All of the service marks, copyrights, franchises, trademarks, trade
names, jingles, slogans, logotypes and other similar intangible assets
maintained, owned, leased or used by the Transferring Party in connection with
the business and operations of its Stations (including any and all applications,
registrations, extensions and renewals relating thereto) (the "Intellectual
Property"), and all of the rights, benefits and privileges associated therewith
including, without limitation, the right to use the call letters for its
Stations identified in Schedule 2.3.4.
2.3.5. PROGRAM CONTRACTS.
The program licenses and contracts under which the Transferring Party is
authorized to broadcast programs on its Stations (collectively the "Program
Contracts") including, without limitation, (a) all program (cash and non-cash)
licenses and contracts listed on Schedule 2.3.5, and (b) any other such program
contracts that are entered into between the date of this Agreement and the
Closing Date in accordance with the terms of this Agreement.
2.3.6. TRADE-OUT AGREEMENTS.
All contracts and agreements (excluding Program Contracts) pursuant to
which commercial air time on the Transferring Party's Stations has been sold,
traded or bartered in consideration for any property or services in lieu of
or in addition to cash (collectively, the "Trade-out Agreements") including,
without limitation, those set forth and identified in Schedule 2.3.6.
2.3.7. BROADCAST TIME SALES AGREEMENT.
All contracts and agreements pursuant to which commercial air time on
the Transferring Party's Stations has been sold for cash (collectively the
"Time Sales Agreements").
2.3.8. NETWORK AFFILIATION AGREEMENTS.
All network affiliation agreements and other contracts of the Stations
of the Transferring Party with a television broadcast network (collectively,
the "Network Agreements") including, without limitation, those listed on
Schedule 2.3.8.
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<PAGE> 15
2.3.9. OPERATING CONTRACTS.
All other operating contracts and agreements relating to the business or
operations of the Transferring Party's Stations, all material such contracts as
of the date hereof being listed on Schedule 2.3.9 (including, without
limitation, the Clear Channel Agreements, all employment agreements and talent
contracts, all leases and subleases relating to the Leased Property, all
agreements relating to any motor vehicles, and all national and local
advertising representation agreements for its Stations), together with all
contracts and agreements that will be entered into between the date of this
Agreement and the Closing Date in accordance with the terms of this Agreement
(collectively, the "Operating Contracts" and together with the Program
Contracts, Trade-out Agreements, Time Sales Agreements and Network Agreements,
the "Station Contracts").
2.3.10. VEHICLES.
All automotive equipment and motor vehicles maintained, owned, leased or
otherwise used by the Transferring Party in connection with the business and
operations of its Stations, including, without limitation, those set forth and
described in Schedule 2.3.10.
2.3.11. FILES AND RECORDS.
All engineering, business and other books, papers, logs, files and
records pertaining to the business and operations of the Transferring Party's
Stations, but not the organizational documents and records of the Transferring
Party.
2.3.12. AUXILIARY FACILITIES.
All translators, earth stations, and other auxiliary facilities, and all
applications therefor owned, leased or otherwise used or useful by the
Transferring Party in connection with the business and operations of its
Stations, including, without limitation, those set forth and described in
Schedule 2.3.12.
2.3.13. PERMITS AND LICENSES.
All permits, approvals, orders, authorizations, consents, licenses,
certificates, franchises, exemptions of, or filings or registrations with, any
court or Governmental Authority (other than the FCC) in any jurisdiction, which
have been issued or granted to or are owned or used or useful by the
Transferring Party in connection with the business and operations of its
Stations and all pending applications therefor.
2.3.14. GOODWILL.
The business of the Transferring Party's Stations as a "going concern",
customer relationships and goodwill.
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2.3.15. Certain Accounts Receivable.
As to STC, all Accounts Receivable arising out of the business and
operations of KSBW, and all Accounts Receivable arising out of the business and
operations of the Burlington Stations from the STC Transfer Date under the
Sinclair Agreement. As to HAT, all Accounts Receivable arising out of the
business and operations of WDTN. Schedule 2.3.15 contains a true and complete
list, dated as of December 31, 1997, of all Accounts Receivable with respect to
KSBW and WDTN as of such date.
2.3.16. RIGHTS UNDER THE SINCLAIR DOCUMENTS.
As to STC, all of STCBV's rights under or pursuant to the Sinclair
Documents except to the extent that such rights pertain to or affect WFFF.
2.3.17. CERTAIN CASH.
As to STC, all cash, cash equivalents or deposits arising out of the
business and operations of the Burlington Stations from and after the STC
Transfer Date, and all interest payable in connection with any such cash, cash
equivalents or deposits after giving effect to the payment of operating expenses
of the Burlington Stations, but excluding any proceeds of a WFFF Disposition (as
defined in that certain Credit Agreement to be entered into by HAT and STCBV Sub
in connection with the Burlington Financing Amount).
2.4. EXCLUDED ASSETS.
Notwithstanding anything to the contrary in this Agreement, there shall
be excluded from the Assets of each Transferring Party and retained by such
Transferring Party, to the extent in existence as of the Closing Date, the
following assets (collectively, the "Excluded Assets") (the Excluded Assets for
the STC Stations are sometimes individually referred to herein as the "STC
Excluded Assets"; and the Excluded Assets for the HAT Stations are sometimes
individually referred to herein as the "HAT Excluded Assets").
2.4.1. CASH.
Except as set forth in Section 2.3.17, all cash, cash equivalents or
deposits held by such Transferring Party, all interest payable in connection
with any such cash, cash equivalents or deposits or short term investments, bank
balances and rights in and to bank accounts, marketable and other securities of
such Transferring Party.
2.4.2. CERTAIN ACCOUNTS RECEIVABLE.
As to STC, all accounts receivable assigned to STCBV Sub for purposes of
collection only under the Sinclair Agreement (the "Sinclair Receivables"); and,
as to HAT, all amounts which are payable to HAT under the Clear Channel
Agreements which were earned prior to the Closing Date.
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2.4.3. PERSONAL PROPERTY DISPOSED OF.
All tangible personal property disposed of or consumed in the Ordinary
Course of Business as permitted by this Agreement.
2.4.4. INSURANCE.
All contracts of insurance and all insurance plans and the assets
thereof.
2.4.5. EMPLOYEE PLANS AND ASSETS.
All Plans, Benefit Arrangements (except for any Station Contracts,
Proration Items or other matters which are specifically required to be assumed
by the Recipient Party pursuant to the terms thereof), Qualified Plans and
Welfare Plans and the assets thereof.
2.4.6. RIGHT TO TAX REFUNDS.
Any and all claims of the Transferring Party with respect to any Tax
refunds.
2.4.7. CERTAIN BOOKS AND RECORDS.
All of (a) the Transferring Party's organizational documents, corporate
books and records (including minute books and stock ledgers and records), and
originals of account books of original entry, (b) duplicated copies of any
books, records, accounts, checks, payment records, Tax records (including
payroll, unemployment, real estate and other Tax records) and other similar
books, records and information of the Transferring Party relating to the
Transferring Party's operation of the business of its Stations prior to the
Closing Date, (c) all records prepared by or on behalf of the Transferring Party
in connection with the acquisition by it or conveyance of its Stations, and (d)
all records and documents relating to any Excluded Assets.
2.4.8. THIRD-PARTY CLAIMS.
To the extent related to any Excluded Assets, all rights and claims of
the Transferring Party whether mature, contingent or otherwise, against third
parties relating to the Assets or the Stations of the Transferring Party,
whether in tort, contract, or otherwise.
2.4.9. RIGHTS UNDER THIS AGREEMENT.
All of the Transferring Party's rights under or pursuant to this
Agreement or any other rights in favor of the Transferring Party pursuant to the
other agreements contemplated hereby.
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2.4.10. RIGHTS UNDER THE HAT MERGER AGREEMENT.
As to HAT, all of HAT's rights under or pursuant to that (a) certain
Amended and Restated Agreement and Plan of Merger, dated as of March 26, 1997,
by and among The Hearst Corporation, HAT Merger Sub, Inc., HAT Contribution Sub,
Inc., Argyle Television, Inc., and (b) that certain Stock Purchase Agreement,
dated as August 26, 1994, by and among Argyle Television Holdings II, Inc. and
NPG, Inc.
2.4.11. NAMES.
As to STC, all rights to the name "Sunrise Television", "STC", "STC
Broadcasting" and any logo or variation thereof and the goodwill associated
therewith; and, as to HAT, all rights to the name "Hearst-Argyle", "Hearst" and
any logo or variation thereof and the goodwill associated therewith.
2.4.12. DEPOSIT AND PREPAID EXPENSES.
All of the Transferring Party's deposits and prepaid expenses, provided,
however, any deposit and prepaid expenses shall be included in the Assets of the
Transferring Party conveyed pursuant hereto to the extent that the Transferring
Party receives a credit therefor in the calculation of the Proration Amount
pursuant to Section 2.6.
2.4.13. SHARED CONTRACTS.
As to STC, all shared contracts and agreements relating to both the STC
Stations and any television broadcast station other than the STC Stations
(including, without limitation, WFFF, subject to Section 2.11) as identified on
Schedule 2.4.13; and, as to HAT, all shared contracts and agreements relating to
both the HAT Stations and any television broadcast station other than the HAT
Stations as identified on Schedule 2.4.13.
2.4.14. LABOR UNION CONTRACTS.
As to STC, all labor union or other collective bargaining agreements
relating to KSBW as identified on Schedule 2.4.14; and, as to HAT, all labor
union or other collective bargaining agreements relating to WDTN as identified
on Schedule 2.4.14.
2.4.15. MISCELLANEOUS EXCLUDED ASSETS.
The assets listed and identified on Schedule 2.4.15.
2.4.16. AFFILIATED TRANSACTIONS.
All of the Transferring Party's rights and obligations under any
Affiliated Transactions except to the extent any such rights or obligations are
temporarily transferred pursuant to Section 6.13, including, without limitation,
those set forth in Schedule 2.4.16.
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2.4.17. ASSETS OF OTHER TELEVISION STATIONS.
As to STC, all assets and properties of STC owned, used, held for use or
leased by STC in connection with the business and operations of any television
broadcast station other than the STC Stations (including, with out limitation,
WFFF, subject to Section 2.11); and, as to HAT, all assets and properties of HAT
owned, used, held for use or leased by HAT in connection with the business and
operations of any television broadcast station other than the HAT Stations.
2.5. EXCHANGE OF ASSETS.
2.5.1. For and in consideration of the conveyance of the STC
Assets to HAT and in addition to the assumption of Liabilities by HAT as set
forth in Section 2.10, at the Closing HAT agrees to (a) transfer to STC
Broadcasting the HAT Non-License Assets and transfer to STC License Company the
HAT License Assets, as provided for in Section 2.2, and (b) pay to STC by wire
transfer of immediately available funds to an account designated by STC the
amount of Twenty-One Million Three Hundred Sixty-Six Thousand Six Hundred and
Fifty Dollars ($21,366,650) (the "Cash Consideration"), less (i) any Burlington
Financing Amount which is not repaid by STCBV Sub as of the Closing Date, and
(ii) plus any adjustments, if any, with respect to the ABC Affiliation Agreement
as described in Section 7.5.
2.5.2. For and in consideration of the conveyance of the HAT
Assets to the STC Exchange Entities, the payment of the Cash Consideration to
STC and in addition to the assumption of Liabilities by STC as set forth in
Section 2.9, at the Closing the STC Exchange Entities agree to transfer to HAT
the STC Assets as provided for in Section 2.3.
2.6. PRORATION AMOUNTS.
2.6.1. At least five (5) days prior to the Closing Date, each
Transferring Party shall make a good faith estimate of the Proration Items for
its Stations that are customary in television broadcast station transactions
(each a "Proration Amount") to reflect that all Proration Items of the
Transferring Party's Stations shall be apportioned between the Recipient Party
and the Transferring Party in accordance with the principle that the
Transferring Party shall receive the benefit of all revenues, refunds, deposits
(other than deposits for Program Contracts which shall be prorated based on the
percentage of the term that the film or program was aired on the Transferring
Party's Stations before the Closing Date and the percentage available to be
aired on and after the Closing Date) and prepaid expenses, and shall be
responsible for all expenses, costs and liabilities allocable to the conduct of
the businesses or operations of the Transferring Party's Stations for the period
prior to the Closing Date, and the Recipient Party shall receive the benefit of
all revenues, refunds, deposits and prepaid expenses, and shall be responsible
for all expenses, costs and liabilities allocable to the conduct of the
businesses or operations of such Stations from and after the Closing Date;
provided, however, there shall be no adjustment or proration for any negative or
positive net trade balance for WPTZ or WNNE except to the extent that the
negative trade balance (i.e., the amount by which the value of goods
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or services to be received is less than the value of any advertising time
remaining to be run) for either Station exceeds Fifty Thousand Dollars ($50,000)
as of the Closing Date; provided, further, that prorations or adjustments
pursuant to this Section 2.6 shall be made with respect to WNAC and WPRI only to
the extent that there are earnings under the Clear Channel Agreements which have
not been paid to HAT and which relate to HAT's period of ownership of WNAC.
Determinations pursuant to this Section 2.6.1 shall be made in accordance with
generally accepted accounting principles consistently applied for the period
prior to the Closing Date. All Proration Amounts shall be payable in cash at
the Closing.
2.6.2. Within ninety (90) days after the Closing Date, the
Recipient Party shall deliver to the Transferring Party in writing and in
reasonable detail a good faith final determination of the Proration Amount
determined as of the Closing Date under Section 2.6.1 ("Final Proration
Amount"). The Transferring Party shall assist the Recipient Party in making
such determination, and the Recipient Party shall provide the Transferring Party
with reasonable access to the properties, books and records relating to the
Stations of the Transferring Party for the purpose of determining the Final
Proration Amount. The Transferring Party shall have the right to review the
computations and workpapers used in connection with the Recipient Party's
preparation of the Final Proration Amount. If the Transferring Party disagrees
with the amount of the Final Proration Amount determined by the Recipient Party,
the Transferring Party shall so notify the Recipient Party in writing within
thirty (30) days after the date of receipt of the Recipient Party's Final
Proration Amount, specifying in detail any point of disagreement; provided,
however, that if the Transferring Party fails to notify the Recipient Party in
writing of the Transferring Party's disagreement within such thirty (30) day
period, the Recipient Party's determination of the Final Proration Amount shall
be final, conclusive and binding on the parties. After the receipt of any
notice of disagreement, the parties shall negotiate in good faith to resolve any
disagreements regarding the Final Proration Amount. If any such disagreement
cannot be resolved by the parties within thirty (30) days after the Recipient
Party has received notice from the Transferring Party of the existence of such
disagreement, the parties shall jointly select a nationally recognized
independent public accounting firm (the "Accounting Firm"), to review the
Recipient Party's determination of the Final Proration Amount and to resolve as
soon as possible all points of disagreement raised by the Transferring Party.
All determinations made by the Accounting Firm with respect to the Final
Proration Amount shall be final, conclusive and binding on the parties. The
fees and expenses of the Accounting Firm incurred in connection with any such
determination shall be shared one-half by the Recipient Party and one-half by
the Transferring Party.
2.6.3. If the Final Proration Amount is such that the
Recipient Party's payment of the Proration Amount at the Closing was an
underpayment to the Transferring Party, then the Recipient Party shall pay such
underpayment amount to the Transferring Party in cash, within two (2) business
days following the final determination of the Final Proration Amount. If the
Final Proration Amount is such that the Recipient Party's payment of the
Proration Amount at the Closing was an overpayment to the Transferring Party,
then the Transferring Party shall pay such overpayment amount to the Recipient
Party in cash within two (2) business days following the final determination of
the Final Proration Amount. Any amounts paid pursuant to
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this Section 2.6.3 shall be by wire transfer of immediately available funds for
credit to the recipient at a bank account identified by such recipient in
writing.
2.6.4. The parties agree that prior to the date of the final
determination of the Final Proration Amount pursuant to this Section 2.6 (by the
Accounting Firm or otherwise), neither party will destroy any records pertaining
to, or necessary for, the final determination of the Final Proration Amount.
2.7. ACCOUNTS RECEIVABLE.
2.7.1. At least five (5) days prior to the Closing Date, STC
shall make a good faith estimate of the Accounts Receivable as of the Closing
Date for KSBW less five percent (5%) reserved for bad debts (the "KSBW
Receivables"), and HAT shall make a good faith estimate of the Accounts
Receivable as of the Closing Date for WDTN less five percent (5%) reserved for
bad debts (the "WDTN Receivables"). On the Closing Date, (a) if the amount of
the KSBW Receivables is greater than the amount of the WDTN Receivables, HAT
shall pay to STC, in cash, the amount of the KSBW Receivables minus the amount
of the WDTN Receivables, and (b) if the amount of the WDTN Receivables is
greater than the amount of the KSBW Receivables, STC shall pay to HAT, in cash,
the amount of the WDTN Receivables minus the amount of the KSBW Receivables.
2.7.2. Within thirty (30) days after the Closing Date, the
Recipient Party shall deliver to the Transferring Party in writing and in
reasonable detail a good faith final determination of the Accounts Receivable
acquired by the Recipient Party as of the Closing Date (the "Final AR Amount").
The Transferring Party shall assist the Recipient Party in making such
determination, and the Recipient Party shall provide the Transferring Party with
reasonable access to the books and records relating to the Stations of the
Recipient Party for the purpose of determining the final Accounts Receivable
amount. The Transferring Party shall have the right to review the computations
and work papers used in connection with the Recipient Party's preparation of the
Final AR Amount. If the Transferring Party disagrees with the Final AR Amount
determined by the Recipient Party, the Transferring Party shall so notify the
Recipient Party within thirty (30) days after the date of receipt of the
Recipient Party's Final AR Amount, specifying in detail any point of
disagreement; provided, however, that if the Transferring Party fails to notify
the Recipient Party in writing of the Transferring Party's disagreement within
such thirty (30) day period, the Recipient Party's determination of the Final AR
Amount shall be final, conclusive and binding on the parties. After the receipt
of any notice of disagreement, the parties shall negotiate in good faith to
resolve any disagreements regarding the Final AR Amount. If any such
disagreement cannot be resolved by the parties within thirty (30) days after the
Recipient Party has received notice from the Transferring Party of the existence
of such disagreement, the parties shall jointly select an Accounting Firm to
review the Recipient Party's determination of the Final AR Amount and to resolve
as soon as possible all points of disagreement raised by the Transferring Party.
All determinations made by the Accounting Firm with respect to the Final AR
Amount shall be final, conclusive and binding on the parties. The
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fees and expenses of the Accounting Firm incurred in connection with any such
determination shall be shared one-half by the Recipient Party and one-half by
the Transferring Party.
2.7.3. If the Final AR Amount is such that the Recipient
Party's payment of the Accounts Receivable amount at the Closing was an
underpayment to the Transferring Party, then the Recipient Party shall pay such
underpayment amount to the Transferring Party in cash, within two (2) business
days following the final determination of the Final AR Amount. If the Final AR
Amount is such that the Recipient Party's payment of the Accounts Receivable
amount at the Closing is an overpayment to the Transferring Party, then the
Transferring Party shall pay such overpayment to the Recipient Party in cash
within two (2) business days following the determination of the Final AR
Amount. Any amount paid pursuant to this Section 2.7 shall be by wire transfer
of immediately available funds for credit to the recipient at a bank account
identified by such recipient in writing.
2.7.4. The parties agree that prior to the date of the final
determination of the Final AR Amount pursuant to this Section 2.7 (by the
Accounting Firm or otherwise) neither party will destroy any records pertaining
to, or necessary for, the final determination of the Final AR Amount.
2.8. ALLOCATION OF ASSET VALUES.
2.8.1. The fair market value of the STC Assets and the HAT
Assets shall be determined and allocated on the basis of an appraisal (the
"Appraisal") prepared by Bond & Pecaro (the "Appraisal Firm"). The Appraisal
Firm shall be instructed to perform an appraisal of the classes of Assets of
each Station and to deliver a report to STC and HAT as soon as reasonably
practicable (the "Appraisal Report"). The Appraisal Report shall be subject to
the approval of HAT and STC and HAT and STC shall cooperate in good faith to
resolve any issues or differences relating to the Appraisal Report. HAT and STC
shall each pay one-half of the fees, costs and expenses of the Appraisal Firm
whether or not the transactions contemplated hereby are consummated.
2.8.2. Within thirty (30) days of receipt of the Appraisal
Report, the parties shall prepare a schedule that sets forth the "exchange
groups" and "residual groups" (as each quoted term is defined by Treas. Reg.
Section 1.1031(j)-1(b)(2)) for the exchanges contemplated by Section 6.12.2 (the
"Section 1031 Schedule"), together with each asset included in the STC Assets
and HAT Assets that belongs to the relevant exchange group or residual group.
The parties shall cooperate in good faith to resolve any issues relating to the
Section 1031 Schedule to be filed by each individual taxpayer.
2.8.3. Each party, as necessary, shall prepare IRS Form 8594
and IRS Form 8824 reflecting the fair market value of the Assets such party has
transferred and received as determined in accordance with the above provisions
and shall forward such form to the other parties within thirty (30) days after
agreement on the Section 1031 Schedule. Each party, as
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necessary, shall file their respective federal income tax returns for the tax
year in which the Closing occurs with the IRS Form 8594 and IRS Form 8824 as
prepared in accordance with the foregoing. The parties hereto hereby covenant
and agree with each other that they will not take a position on any income tax
return that is in any way inconsistent with the terms of this Section 2.8.3.
2.9. ASSUMPTION OF LIABILITIES BY STC.
2.9.1. At the Closing, STC shall assume, pay, perform,
discharge and indemnify and hold HAT harmless from and against (a) all
Liabilities arising out of events occurring on or after the Closing Date related
to the businesses or operations of the HAT Stations or the ownership of the HAT
Assets by STC, (b) all Liabilities arising out of events occurring on or after
the Closing Date with respect to the FCC Licenses of HAT, (c) all Liabilities
arising on or after the Closing Date under the Station Contracts of HAT
(including, without limitation, Trade-out Agreements) pursuant to their terms
(except for Liabilities for any breaches thereunder by HAT occurring prior to
the Closing Date), (d) all Liabilities for which there is an adjustment in favor
of STC in connection with the calculation of the Proration Amount, and (e) all
Liabilities to employees of the HAT Stations to be assumed by STC in accordance
with Section 6.9 hereof.
2.9.2. Except for the Assumed Liabilities described in this
Section 2.9, no STC Party will assume any other Liabilities of any kind or
description of HAT.
2.10. ASSUMPTION OF LIABILITIES BY HAT.
2.10.1. At the Closing, HAT shall assume, pay, perform,
discharge and indemnify and hold STC harmless from and against (a) all
Liabilities arising out of events occurring on or after the Closing Date related
to the businesses or operations of the STC Stations or the ownership of the STC
Assets by HAT, (b) all Liabilities arising out of events occurring on or after
the Closing Date with respect to the FCC Licenses of STC License Company, (c)
all Liabilities arising on or after the Closing Date under the Station Contracts
of STC (including, without limitation, Trade-out Agreements) pursuant to their
terms (except for Liabilities for any breaches thereunder by STC occurring prior
to the Closing Date), (d) all Liabilities for which there is an adjustment in
favor of HAT in connection with the calculation of the Proration Amount, (e) all
Liabilities to employees of the STC Stations to be assumed by HAT in accordance
with Section 6.8 and Section 6.9 hereof, (f) except for the WFFF Liabilities,
all Liabilities of STC under the Sinclair Documents (or Liabilities assumed
pursuant to the terms thereof), and (g) all Liabilities arising out of events
occurring on or after the Non-License Transfer (as defined in the Sinclair
Agreement) relating to the business and operations of WNNE and WPTZ (the
Liabilities described in Section 2.10.1(f) and Section 2.10.1(g) are sometimes
collectively referred to herein as the "Sinclair Liabilities").
2.10.2. Except for the Assumed Liabilities described in this
Section 2.10, HAT will not assume any other Liabilities of any kind or
description of STC.
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2.11. MATTERS RELATED TO THE BURLINGTON STATIONS.
2.11.1. HAT acknowledges and agrees that the consummation of
the purchase by STC of WPTZ and WNNE is, as of the date of this Agreement,
pending pursuant the terms of the Sinclair Agreement. Notwithstanding anything
to the contrary set forth herein or otherwise, no STC Party shall make or be
deemed to make any representations, warranties, covenants or agreements
regarding WPTZ or WNNE or any assets related thereto until the consummation of
the purchase by STC of such Stations and Assets and thereafter any
representations, warranties, covenants or agreements regarding such Stations and
Assets shall only relate to STC's period of ownership of such Stations and
Assets. In addition, the terms "STC Assets", "Assets", "STC Stations" and
"Stations" shall not include WPTZ or WNNE or the related assets of such stations
until such time as WPTZ and WNNE are acquired by STC pursuant to the Sinclair
Agreement.
2.11.2. At the Closing, STC Broadcasting (as the
successor-in-interest to STCBV Sub) agrees to assign to HAT all of STC
Broadcasting's right, title and interest in, to and under the Sinclair Documents
that relate to WPTZ, WNNE and any assets related thereto (but not including the
assets of WFFF). In the event that any such rights and interests are not
assignable, STC Broadcasting shall use commercially reasonable efforts (a) to
provide HAT the financial and business benefits HAT would have enjoyed had such
rights and interests been assignable as of the date hereof, and (b) upon the
request of HAT, to enforce in STC Broadcasting's name for the account of HAT any
rights that would otherwise have been available to HAT had the rights and
interests under the Sinclair Documents been assignable as of the date hereof.
2.11.3. Subject to the terms and conditions of Section 2.11.4
below, all of the assets used in the operation of WFFF shall be retained by STC
Broadcasting or its permitted designee, including the rights and obligations of
Heritage Media Corporation pursuant to the Broadcast Facilities Agreement and
Time Brokerage Agreement, each entered into on August 3, 1995, as amended (the
"WFFF TBA"). As of the Closing Date, HAT shall operate WFFF pursuant to the
WFFF TBA for a period up to two (2) years from the Closing Date until such time
as STC Broadcasting requests termination of such operation by HAT (the "Interim
Operation"). Under the Interim Operation, STC Broadcasting shall receive all
income net of any out-of-pocket expenses incurred by HAT for the operation of
WFFF and shall reimburse HAT if WFFF is being operated at a net deficit. STC
Broadcasting shall be responsible for all payments due to Champlain Valley
Telecasting, Inc. pursuant to the WFFF TBA during the Interim Operation. At the
conclusion of the Interim Operation, STC Broadcasting shall no longer use any of
the WPTZ facilities in connection with the operation of WFFF, other than the use
of tower and equipment space at Terry Mountain, New York, until such time as STC
Broadcasting is able to relocate its transmission facilities to Mt. Mansfield,
Vermont. There will be no charges for rental of such space for a period of up
to two (2) years after the conclusion of the Interim Operation. HAT agrees to
cooperate at the sole expense of STC Broadcasting in all reasonable respects in
connection with such relocation. In the event that STC Broadcasting is
unsuccessful in relocating WFFF to Mt. Mansfield within this two (2) year
period, HAT agrees to enter into a twenty (20) year lease agreement with STC
Broadcasting for the Terry Mountain space on fair
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market value terms and conditions. During the period of the Interim Operation,
STC Broadcasting shall not have the right to assign the WFFF TBA (and any rights
or obligations hereunder relating to WFFF), in whole or in part, except (a) to
any Affiliate of STC Broadcasting or (b) to any other Person with the prior
written consent of HAT (which consent shall not be unreasonably withheld,
conditioned or delayed).
2.11.4. HAT acknowledges and agrees that certain of the STC
Assets are also used, held for use or useful in connection with the business and
operations of WFFF (collectively, the "STC Shared Assets"). Prior to the
Closing, STC Broadcasting and HAT shall in good faith allocate the STC Shared
Assets between STC Broadcasting and HAT in accordance with the principle that
those STC Shared Assets used solely in connection with the business and
operations of WFFF shall be retained by STC Broadcasting and included in the STC
Excluded Assets, and all other STC Shared Assets shall be transferred to HAT.
Notwithstanding the foregoing, to the extent that any of the STC Shared Assets
retained by STC Broadcasting are necessary for HAT's operation of WPTZ and/or
WNNE after the Closing, or any of the STC Shared Assets conveyed to HAT are
necessary for STC Broadcasting's continued operation of WFFF after the Closing,
such STC Shared Assets shall be available for joint use by the parties at no
cost for a transitional period for up to two (2) years following the Closing
Date.
2.11.5. At the Closing, the parties agree to enter into a
mutually agreeable transitional services agreement which shall set forth the
terms and conditions of (a) the Interim Operation described in Section 2.11.3,
and (b) the joint use of certain STC Shared Assets described in Section 2.11.4.
2.11.6. In order to provide an equitable sharing of the
indemnities contained in Article 12 of the Sinclair Agreement and the Guaranty
of even date by Sinclair Parent, the parties will coordinate the filing of any
claims against Sinclair or Sinclair Parent so that (a) with respect to WFFF, STC
shall have the benefits of up to two percent (2%) of the Basket Amount (as
defined in the Sinclair Agreement) and the Indemnity Cap (as defined in the
Sinclair Agreement), and (b) with respect to WPTZ and WNNE, HAT shall have the
benefits of up to ninety-eight percent (98%) of the Basket Amount (as defined in
the Sinclair Agreement) and the Indemnity Cap (as defined in the Sinclair
Agreement). However, if STC, on the one hand, or HAT, on the other hand, does
not use all of its respective share of such Basket Amount or Indemnity Cap prior
to the scheduled expiration date for the filing of claims against Sinclair or
Sinclair Parent, then the parties shall cooperate so that to the fullest extent
practicable the unused portion of such share shall be made available by STC to
HAT or by HAT to STC, as the case may be, immediately prior to such scheduled
expiration date.
2.12. MATTERS RELATED TO THE PROVIDENCE STATIONS.
HAT represents and warrants to the STC Parties that the only HAT Assets
owned, leased, used or useful by HAT in connection with the business and
operations of WNAC are as set forth in Schedule 2.12 (the "Providence Assets").
In reliance upon such representation and warranty, each STC Party acknowledges
and agrees that, notwithstanding anything to the contrary set forth herein or
otherwise, HAT shall not make nor be deemed to make any
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<PAGE> 26
representations, warranties, covenants or agreements regarding WNAC or WPRI or
any assets related thereto, except to the extent any such representation,
warranty, covenant or agreement relates to, or is applicable to, the Providence
Assets, the Clear Channel Agreements or the HAT Balance Sheets.
2.13 FINANCING OF BURLINGTON STATIONS.
On or prior to the acquisition of the non-licensed STC Assets from
Sinclair pursuant to the terms of the Sinclair Agreement, STCBV shall assign to
STCBV Sub all of STCBV's rights under the Sinclair Documents and HAT agrees to
loan to STCBV Sub, such amounts as are contemplated by the credit agreement,
guaranty and related documents in the form of Exhibit F (all loans thereunder
being referred to as the "Burlington Financing Amount"), and STCBV and STCBV Sub
agree to simultaneously execute and deliver to HAT, and HAT agrees to
simultaneously execute and deliver to STCBV and STCBV Sub, such credit
agreement, guaranty and related documents.
2.14. WORKING CAPITAL.
(a) From and after the STC Transfer Date through the Closing Date, HAT
agrees to make advances to STCBV Sub for the working capital requirements of
STCBV Sub in connection with the business and operations of the Burlington
Stations during such period (each a "Working Capital Advance"), as STC may
request from time to time. In order to request a Working Capital Advance,
STCBV Sub shall deliver written notice to HAT at least three (3) business days
prior to the proposed date of the Working Capital Advance, signed by or on
behalf of STCBV Sub, and specifying the following information: (i) the date of
such Working Capital Advance, (ii) the amount of such Working Capital Advance
(which amount shall not be less than Two Hundred and Fifty Thousand Dollars
($250,000)), and (iii) the number and location of the account to which funds are
to be disbursed. Upon receipt of any such notice, HAT shall deliver the amount
of the Working Capital Advance to STCBV Sub, by wire transfer of federal funds
to the account specified in such notice and within three (3) business days
following the date specified in such notice.
(b) STCBV Sub and HAT acknowledge and agree that each Working Capital
Advance shall be used by STCBV Sub for general working capital purposes in the
business and operations of the Burlington Stations from and after the STC
Transfer Date through the Closing Date, which shall include, without limitation
(i) payments of any proration amounts owed by STCBV Sub under the Sinclair
Agreement, (ii) fees under that certain TBA Agreement (as defined in the
Sinclair Agreement), and (iii) interest payments arising under the Burlington
Financing Amount. STCBV Sub acknowledges and agrees that in the event this
Agreement is terminated as provided in Section 11.2, STCBV Sub agrees to
reimburse HAT for any Working Capital Advances provided by HAT pursuant to this
Section 2.14.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES BY THE STC PARTIES
Each STC Party, with respect to such STC Party and with respect to the
STC Stations and STC Assets owned by such STC Party, represents and warrants to
HAT as follows:
3.1. ORGANIZATION AND STANDING.
The STC Party is duly organized, validly existing and in good standing
under the laws of the state of its organization and is or will be prior to the
Closing Date duly qualified to do business and is or will be prior to the
Closing Date in good standing in any jurisdiction where its STC Stations are
located and operated and in each other jurisdiction where and at such time as
such qualification is necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on its STC Stations. The STC Party has the corporate
power and authority to own, lease and otherwise to hold and operate its STC
Assets, to carry on the business of its STC Stations as now conducted, and to
enter into and perform the terms of this Agreement, the other STC Documents to
which the STC Party is a party and the transactions contemplated hereby and
thereby.
3.2. AUTHORIZATION.
The execution, delivery and performance of this Agreement and of the
other STC Documents to which the STC Party is a party, and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action (none of which actions has been
modified or rescinded and all of which actions are in full force and effect).
This Agreement constitutes, and upon execution and delivery of the other
agreements to which the STC Party is a party will constitute, valid and binding
agreements and obligations of the STC Party, enforceable against the STC Party
in accordance with their respective terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights generally and
by the application of general principles of equity.
3.3. COMPLIANCE WITH LAWS.
To STC's knowledge, STC is in material compliance with all Laws
applicable to the STC Assets and to the business and operations of the STC
Stations. STC has obtained and holds all material permits, licenses and
approvals (none of which has been modified or rescinded and all of which are in
full force and effect) from all Governmental Authorities necessary in order to
conduct the operations of the STC Stations as presently conducted.
3.4. CONSENTS AND APPROVALS; NO CONFLICTS.
3.4.1. The execution and delivery of this Agreement, and the
performance of the transactions contemplated herein by the STC Party, will not
require any consent, approval,
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authorization or other action by, or filing with or notification to, any Person
or Governmental Authority, except as follows: (a) filings required under
Hart-Scott-Rodino, (b) consents to the assignment of the FCC Licenses by the
FCC, (c) filings, if any, with respect to real estate transfer taxes, (d)
certain of the Station Contracts may be assigned only with the consent of third
parties, as specified in Schedule 3.4, and (e) filings with the Securities and
Exchange Commission.
3.4.2. Assuming all consents, approvals, authorizations and
other actions described in Section 3.4.1 have been obtained and all filings and
notifications described in Section 3.4.1 have been made, the execution, delivery
and performance of this Agreement and the other STC Documents to which the STC
Party is a party do not and will not (a) conflict with or violate in any
material respect any Law applicable to the STC Party, its STC Assets or STC
Stations or by which any of its STC Assets or STC Stations is subject or
affected, (b) conflict with or result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
of any of the STC Party's Station Contracts or other material agreements to
which the STC Party is a party or by which the STC Party is bound or to which
any of its STC Assets or STC Stations is subject or affected, (c) result in the
creation of any Encumbrance upon its STC Assets, or (d) conflict with or violate
the organizational documents of the STC Party.
3.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
3.5.1. STC has provided to HAT unaudited balance sheets of the
STC Stations as listed on Schedule 3.5 (the "STC Balance Sheets"), and unaudited
statements of income and operating cash flows for the STC Stations as listed on
Schedule 3.5. Such financial statements (a) present fairly in all material
respects the financial condition of the STC Stations as of the date and the
results of operations and operating cash flows for the period indicated, and (b)
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except that the financial statements referred to
in this Section 3.5.1 do not contain all footnotes and cash flow information
from investing and financing activities required under generally accepted
accounting principles and are subject to customary year-end adjustments). To
the knowledge of STC, the Accounts Receivable of STC shown on the balance sheets
described in this Section 3.5 and the KSBW Receivables have been collected or
are collectible in amounts not less than the amounts thereof carried on the
books of STC, except to the extent of the allowance for doubtful accounts shown
on such balance sheets.
3.5.2. There exist no Liabilities of the STC Stations relating
to, or arising out of, the business or operations of the STC Stations,
contingent or absolute, matured or unmatured, known or unknown, except (a) as
reflected on the STC Balance Sheets and (b) for Liabilities that (i) were
incurred after December 31, 1997 (the "Current Balance Sheet Date") in the
Ordinary Course of Business, or (ii) were not required to be reflected on the
STC Balance Sheets in accordance with generally accepted accounting principles
applied on a consistent basis.
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<PAGE> 29
3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth and described in Schedule 3.6, since the Current
Balance Sheet Date, there has been no Material Adverse Effect on the STC
Stations. Since the Current Balance Sheet Date, the business of the STC
Stations has been conducted in the Ordinary Course of Business, and the STC
Party has not, with respect to its STC Stations or STC Assets, (a) incurred any
extraordinary loss of, or injury to, any of its STC Assets as the result of any
fire, explosion, flood, windstorm, earthquake, labor trouble, riot, accident,
act of God or public enemy or armed forces, or other casualty; (b) incurred, or
become subject to, any Liability, except current Liabilities incurred in the
Ordinary Course of Business; (c) discharged or satisfied any Encumbrance or paid
any Liability other than current Liabilities shown in the STC Balance Sheets,
current Liabilities incurred since the Current Balance Sheet Date in the
Ordinary Course of Business, and Liabilities (including, without limitation,
partial and complete prepayments) arising under any credit or loan agreement
between the STC Party and its lenders; (d) mortgaged, pledged or subjected to
any Encumbrance any of its STC Assets (except for Permitted Encumbrances); (e)
made any material change in any method of accounting or accounting practice; (f)
sold, leased, assigned or otherwise transferred any of its material STC Assets
other than obsolete STC Assets which have been replaced by suitable
replacements; (g) made any material increase in compensation or benefits payable
to any employee other than in the Ordinary Course of Business; or (h) made any
agreement to do any of the foregoing.
3.7. ABSENCE OF LITIGATION.
As of the date hereof, except as set forth in Schedule 3.7, there is no
material or, to STC's knowledge, immaterial action, suit, investigation, claim,
arbitration, litigation or similar proceeding, nor any order, decree or judgment
pending or, to STC's knowledge, threatened against STC, the STC Assets or STC
Stations before any Governmental Authority.
3.8. ASSETS.
Except for the STC Excluded Assets, the STC Assets include all of the
assets or property used or useful in the businesses of the STC Stations as
presently operated, including all of the assets or property acquired under the
Sinclair Documents. Except for leased or licensed STC Assets, STC is the owner
of, and has good title to, the STC Assets free and clear of any Encumbrances,
except for Permitted Encumbrances (including, without limitation, those items
set forth on Schedule 3.8). At the Closing, HAT shall acquire good title to,
and all right, title and interest in and to the STC Assets, free and clear of
all Encumbrances, except for Permitted Encumbrances.
3.9. FCC MATTERS.
3.9.1. STC License Company holds the FCC Licenses for the STC
Stations listed as held by the STC License Company on Schedule 2.3.1. The FCC
Licenses contained on Schedule 2.3.1 constitute all of the licenses, permits and
authorizations from the FCC that are
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required for the business and operations of the STC Stations. Except as set
forth on Schedule 3.9, such FCC Licenses are valid and in full force and effect
through the dates set forth on Schedule 2.3.1, unimpaired by any condition,
other than as set forth in such FCC Licenses. Except as set forth on Schedule
3.9, no application, action or proceeding is pending for the renewal or
modification of any of STC License Company's FCC Licenses, and, except for
actions or proceedings affecting television broadcast stations generally, no
application, complaint, action or proceeding is pending or, to STC's knowledge,
threatened that may result in the (a) the revocation, modification, non-renewal
or suspension of any of STC License Company's FCC Licenses, or (b) the issuance
of a cease-and-desist order. Except as set forth in Schedule 3.9, STC has no
knowledge of any facts, conditions or events relating to STC License Company or
its STC Stations that would reasonably be expected to cause the FCC to revoke
any of the FCC Licenses for the STC Stations or not to grant any pending
applications for renewal of any FCC Licenses for the STC Stations or to deny the
assignment of the FCC Licenses of STC License Company to HAT as provided for in
this Agreement.
3.9.2. (a) Except as disclosed in Schedule 3.9, STCBV Sub is,
and pending the closing under the Sinclair Agreement will remain legally,
financially and otherwise qualified under the Communications Act and all rules,
regulations and policies of the FCC to acquire and operate the Burlington
Stations. Except as disclosed in Schedule 3.9, there are no facts or
proceedings which would reasonably be expected to disqualify STCBV Sub under the
Communications Act or otherwise from acquiring or operating any of the
Burlington Stations or would cause the FCC not to approve the assignment of the
FCC Licenses to STCBV Sub. Except as disclosed in Schedule 3.9, STC has no
knowledge of any fact or circumstance relating to STC or any Affiliate of STC
that would reasonably be expected to (i) cause the filing of any objection to
the assignment of the FCC Licenses for the Burlington Stations from Sinclair to
STCBV Sub, or (ii) lead to a delay in the processing by the FCC of the
applications for such assignment. Except for existing waivers pertaining to the
Burlington Stations and except for the temporary waiver specified in Schedule
3.9, no waiver of any FCC rule or policy is necessary to be obtained for the
grant of the applications for the assignment of the FCC Licenses for the
Burlington Stations from Sinclair to STCBV Sub, nor will processing pursuant to
any exception or rule of general applicability be requested or required in
connection with the consummation of the transactions herein.
(b) Except as disclosed in Schedule 3.9, each of STC License
Company and SALC is, and pending the Closing will remain legally, financially
and otherwise qualified under the Communications Act and all rules, regulations
and policies of the FCC to acquire and operate WDTN and WNAC, respectively.
Except as disclosed in Schedule 3.9, there are no facts or proceedings which
would reasonably be expected to disqualify STC License Company or SALC under the
Communications Act or otherwise from acquiring or operating WDTN and WNAC,
respectively, or would cause the FCC not to approve the assignment of the FCC
Licenses of WDTN and WNAC to STC License Company and SALC, respectively. Except
as disclosed in Schedule 3.9, STC has no knowledge of any fact or circumstance
relating to STC or any Affiliate of STC that would reasonably be expected to (i)
cause the filing of any objection to the assignment of the FCC Licenses for WDTN
and WNAC from HAT to STC License
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<PAGE> 31
Company and SALC, respectively, or (ii) lead to a delay in the processing by
the FCC of the applications for such assignment. Except for existing waivers
pertaining to the HAT Stations, no waiver of any FCC rule or policy is necessary
to be obtained for the grant of the applications for the assignment of the FCC
Licenses for WDTN and WNAC from HAT to STC License Company and SALC,
respectively, nor will processing pursuant to any exception or rule of general
applicability be requested or required in connection with the consummation of
the transactions herein.
3.10. REAL PROPERTY.
3.10.1. STC has good and marketable fee simple title to all
fee estates included in the Real Property of STC and good title to all other
owned Real Property of STC, in each case free and clear of all Encumbrances,
except for Permitted Encumbrances (including, without limitation, those items
listed on Schedule 3.10).
3.10.2. STC has a valid leasehold interest in all Leased
Property listed as leased by STC in Schedule 2.3.2. Schedule 2.3.2 lists all
leases and subleases pursuant to which any of such Leased Property is leased by
STC in connection with the business and operations of the STC Stations. STC is
the owner and holder of all such Leased Property purported to be granted by such
leases and subleases. Each such lease and sublease is valid as to STC
thereunder and, to STC's knowledge valid as to any other party thereto, and is
in full force and effect and, to STC's knowledge, constitutes a legal and
binding obligation of, and is legally enforceable against STC and each other
party thereto and grants the leasehold interest it purports to grant, including
any rights to nondisturbance and peaceful and quiet enjoyment that may be
contained therein. The lessees and sublessees are, and to the knowledge of STC,
all other parties are, in compliance in all material respects with the
provisions of such leases and subleases.
3.10.3. The Real Property and the Leased Property of STC
listed in Schedule 2.3.2 constitute all of the real property owned, leased or
used in the business and operations of the STC Stations which is material to the
business and operations of the STC Stations.
3.10.4. No portion of the Real Property of STC or any
building, structure, fixture or improvement thereon is the subject of, or
affected by, any condemnation, eminent domain or inverse condemnation proceeding
currently instituted or pending or, to the knowledge of STC, threatened. To
STC's knowledge, and to the extent that such documents are in the possession of
STC, STC has delivered to HAT true, correct and complete copies of the following
documents with respect to its Real Property and Leased Property as identified in
Schedule 3.10: (i) deeds, by which STC has received a fee interest in any of
such Real Property; (ii) leases for all of its Leased Property; (iii) title
insurance policies or commitments; (iv) surveys; and (v) inspection reports or
other instruments or reports, including, without limitation, any phase I or
phase II environmental reports or other similar environmental reports, surveys
or assessments (including any and all amendments and other modifications of such
instruments).
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3.11. INTELLECTUAL PROPERTY.
STC possesses adequate rights, licenses and authority to use all
Intellectual Property necessary to conduct the business of the STC Stations as
presently conducted. STC has good title to all Intellectual Property
maintained, owned, leased or used in connection with the business and operations
of the STC Stations, free and clear of any Encumbrances, except for Permitted
Encumbrances. STC is not obligated to pay any royalty or other fees to anyone
with respect to the Intellectual Property of STC. STC has not received any
written notice to the effect that any service rendered by STC relating to the
business of the STC Stations may infringe, or that STC is otherwise infringing,
on any intellectual property right or other legally protectable right of
another. No director, officer or employee of STC has any interest in any
Intellectual Property.
3.12. STATION CONTRACTS.
Complete and correct copies of the Station Contracts of STC set forth in
Schedules 2.3.5, 2.3.6, 2.3.8 and 2.3.9 (which schedules, as to STC, are true
and correct in all material respects) have been made available to HAT and (a)
each such material Station Contract and, to STC's knowledge, each such
immaterial Station Contract, is in full force and effect and constitutes a
legal, valid and binding obligation of STC, and, to STC's knowledge, of each
other party thereto; (b) STC is not in breach or default in any material respect
of the terms of any such Station Contract; (c) none of the material rights of
STC under any such Station Contract will be subject to termination, nor will a
default occur, as a result of the consummation of the transactions contemplated
hereby, except to the extent that failure to obtain the prior consent to
assignment thereof of any party thereto shall or could be interpreted to
constitute a termination or modification of or a default under any such Station
Contract; and (d) to the knowledge of STC, no other party to any such Station
Contract is in breach or default in any material respect of the terms
thereunder.
3.13. TAXES.
STC has (or, in the case of returns becoming due after the date hereof
and on or before the Closing Date, will have prior to the Closing Date) duly
filed all material Tax Returns required to be filed by STC on or before the
Closing Date with respect to all material applicable Taxes. In the case of any
such Tax Returns which receive an extension for their date of filing, such Tax
Returns will be considered due on, and not considered required to be filed
before, the extended due date. All such Tax Returns are (or, in the case of
returns becoming due after the date hereof and on or before the Closing Date,
will be) true and complete in all material respects. STC has: (a) paid all
Taxes due to any Governmental Authority as indicated on such Tax Returns; or (b)
established (or, in the case of amounts becoming due after the date hereof,
prior to the Closing Date will have established) adequate reserves (in
conformity with generally accepted accounting principles consistently applied)
for the payment of such Taxes.
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3.14. EMPLOYEE BENEFIT PLANS.
3.14.1. Schedule 3.14 lists all Plans and Benefit Arrangements
maintained by or contributed to by STC for the benefit of the employees of the
STC Stations (collectively referred to as "STC Benefit Plans"). Each STC
Benefit Plan has been maintained in material compliance with its terms and with
ERISA, the Code and other applicable Laws.
3.14.2. Schedule 3.14 sets forth a list of all Qualified Plans
maintained by or contributed to by STC for the benefit of the employees of the
STC Stations. All such Qualified Plans and any related trust agreements or
annuity agreements (or any other funding document) have been maintained in
material compliance with ERISA and the Code (including, without limitation, the
requirements for tax qualification described in Section 401 thereof), other than
any Multiemployer Plan. To STC's knowledge, any trusts established under such
Plans are exempt from federal income taxes under Section 501(a) of the Code.
3.14.3. Schedule 3.14 lists all funded Welfare Plans of STC
that provide benefits to current or former employees of the STC Stations or
their beneficiaries. To STC's knowledge, the funding under each such Welfare
Plan does not exceed and has not exceeded the limitations under Sections 419A(b)
and 419A(c) of the Code. To STC's knowledge, STC is not subject to taxation on
the income of any such Welfare Plan's welfare benefit fund (as such term is
defined in Section 419(e) of the Code) under Section 419A(g) of the Code.
3.14.4. STC has no post-retirement medical, life insurance or
other benefits promised, provided or otherwise due now or in the future to
current, former or retired employees of the STC Stations.
3.14.5. To STC's knowledge, except as set forth in Schedule
3.14, STC has (a) filed or caused to be filed all returns and reports on STC's
Plans that they are required to file and (b) paid or made adequate provision for
all fees, interest, penalties, assessments or deficiencies that have become due
pursuant to those returns or reports or pursuant to any assessment or adjustment
that has been made relating to those returns or reports. All other fees,
interest, penalties and assessments that are payable by or for STC have been
timely reported, fully paid and discharged. There are no unpaid fees,
penalties, interest or assessments due from STC or from any other person that
are or could become an Encumbrance on any of the STC Assets or could otherwise
adversely affect the businesses of the STC Stations or STC Assets. To STC's
knowledge, STC has collected or withheld all amounts that are required to be
collected or withheld by it to discharge its obligations, and all of those
amounts have been paid to the appropriate Governmental Authority or set aside in
appropriate accounts for future payment when due. STC has furnished to HAT true
and complete copies of all documents setting forth the terms and funding of each
of STC's Plans.
3.14.6. Except as set forth in Schedule 3.14, neither STC nor
any ERISA Affiliate of STC has ever sponsored or maintained, had any obligation
to sponsor or maintain, or had any liability (whether actual or contingent, with
respect to any of its assets or otherwise) with respect to any of STC's Plans
subject to Section 302 of ERISA or Section 412 of the Code
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or Title IV of ERISA (including any Multiemployer Plan). Neither STC nor any
ERISA Affiliate of STC (since January 1, 1989) has terminated or withdrawn from
or sought a funding waiver with respect to any plan subject to Title IV of
ERISA, and no facts exist that could reasonably be expected to cause such
actions in the future; no accumulated funding deficiency (as defined in Code
Section 412), whether or not waived, exists with respect to any such plan; no
reportable event (as defined in ERISA Section 4043) has occurred with respect to
any such plan (other than events for which reporting is waived); all costs of
any such plans have been provided for on the basis of consistent methods in
accordance with sound actuarial assumptions and practices, and the assets of
each such plan, as of its last valuation date, exceeded its "Benefit
Liabilities" (as defined in ERISA Section 4001(a)(16)); and, since the last
valuation date for each such plan, no such plan has been amended or changed to
increase the amounts of benefits thereunder and, to the knowledge of STC, there
has been no event that would reduce the excess of assets over benefit
liabilities; and except as set forth in Schedule 3.14, neither STC nor any ERISA
Affiliate of STC has ever made or been obligated to make, or reimbursed or been
obligated to reimburse another employer for, contributions to any Multiemployer
Plan of STC.
3.14.7. No claims (other than for benefits in the Ordinary
Course of Business) or lawsuits are pending or, to the knowledge of STC,
threatened by, against, or relating to any of the STC Benefit Plans. To STC's
knowledge, the STC Benefit Plans are not presently under audit or examination
(nor has notice been received of a potential audit or examination) by the IRS,
the Department of Labor, or any other governmental agency or entity and no
matters are pending with respect to any Qualified Plan of STC under the IRS's
Voluntary Compliance Resolution program, its Closing Agreement Program, or other
similar programs.
3.14.8. With respect to each Plan of STC, there has occurred
no non-exempt "prohibited transaction" (within the meaning of Section 4975 of
the Code) or transaction prohibited by Section 406 of ERISA or breach of any
fiduciary duty described in Section 404 of ERISA that would, if successful,
result in any liability for STC.
3.14.9. STC has no liability with respect to any employee
benefit plan of STC that is not a STC Benefit Plan (exclusive of severance
arrangements and retention agreements) or with respect to any employee benefit
plan sponsored or maintained (or which has been or should have been sponsored or
maintained or with respect to which there has been an obligation to do so) by
any ERISA Affiliate of STC.
3.14.10. All group health plans of STC and its ERISA
Affiliates covering any current or former employees of the STC Stations have
been operated in material compliance with the requirements of Sections 4980B
(and its predecessor) and 5000 of the Code, and STC has provided, or will have
provided before the Closing Date, to individuals entitled thereto all required
notices and coverage pursuant to Section 4980B with respect to any "qualifying
event" (as defined therein) occurring before or on the Closing Date.
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3.15. LABOR RELATIONS.
Schedule 3.15 contains a true and complete list of all employees engaged
in the business or operations of the STC Stations as of the date set forth on
the list, together with such employee's position, salary and date of hire.
Schedule 3.15 lists all written employment contracts with any such employees and
all written agreements, plans, arrangements, commitments and understandings
pursuant to which STC has severance obligations with respect to such employees.
Except as set forth on Schedule 3.15, no labor union or other collective
bargaining unit represents or, to STC's knowledge, claims to represent, any of
the employees of the STC Stations. There are no strikes, work stoppages,
grievance proceedings, union organization efforts, or other controversies
pending between STC and any union or collective bargaining unit representing
(or, to STC's knowledge, claiming to represent) any employees of the STC
Stations. STC is in compliance with all Laws relating to the employment of
employees of the STC Stations or the workplace of the STC Stations, including,
without limitation, provisions relating to wages, hours, collective bargaining,
safety and health, work authorization, equal employment opportunity, immigration
and the withholding of income taxes, unemployment compensation, worker's
compensation, employee privacy and right to know and social security
contributions, except for any noncompliance which would not have a Material
Adverse Effect on the STC Stations. Except as set forth on Schedule 3.15, there
are no collective bargaining agreements relating to the STC Stations or the
business and operations thereof.
3.16. ENVIRONMENTAL MATTERS.
3.16.1. Schedule 3.16 contains a true and complete list and
brief summary of all material reports, audits and other documents relating to
the environmental condition of STC's Real Property in STC's possession.
3.16.2. Except as set forth in Schedule 3.16, to STC's
knowledge (which knowledge is based on the items set forth on Schedule 3.16),
STC is in material compliance with, and STC's Real Property and all improvements
thereon are in material compliance with, all Environmental Laws.
3.16.3. Except as set forth in Schedule 3.16, there are no
pending or, to the knowledge of STC , threatened actions, suits, claims, or
other legal proceedings based on (and STC has not received any written notice of
any complaint, order, directive, citation, notice of responsibility, notice of
potential responsibility, or information request from any Governmental Authority
arising out of or attributable to): (a) the current or past presence at any
part of STC's Real Property of Hazardous Materials; (b) the current or past
release or threatened release into the environment from STC's Real Property
(including, without limitation, into any storm drain, sewer, septic system or
publicly owned treatment works) of any Hazardous Materials; (c) the off-site
disposal of Hazardous Materials originating on or from STC's Real Property or
the STC Assets or businesses of the STC Stations; (d) any facility operations or
procedures of the STC Stations which do not conform to requirements of the
Environmental Laws; or (e) any violation of Environmental Laws at any part of
STC's Real Property arising from activities of the STC
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Stations involving Hazardous Materials. To the knowledge of STC, STC has been
duly issued all material permits, licenses, certificates and approvals required
under any Environmental Law.
3.17. INSURANCE.
Schedule 3.17 contains a true and complete list and brief summary of all
policies of title, property, fire, casualty, liability, life, workmen's
compensation, libel and slander, and other forms of insurance of any kind
relating to the STC Assets or the business and operations of the STC Stations.
All such policies: (a) are in full force and effect; (b) are sufficient for
compliance in all material respects with all requirements of Law and of all
material agreements to which STC is a party; and (c) to STC's knowledge, are
valid, outstanding, and enforceable policies and the policy holder is not in
default in any material respect thereunder.
3.18. REPORTS.
All material returns, reports and statements that the STC Stations are
currently required to file with the FCC or any governmental agency have been
timely filed, and all reporting requirements of the FCC and other governmental
authorities having jurisdiction thereof have been complied with in all material
respects. All of such reports, returns and statements are complete and correct
in all material respects as filed. To STC's knowledge, all documents required
by the FCC to be deposited by STC in its public files (as defined in the rules
and regulations of the FCC) during the period of operation of the STC Stations
by STC have been deposited therein.
3.19. AFFILIATED TRANSACTIONS.
Except as set forth in Schedule 3.19, the STC Party is not now, and
during the past three (3) years has not been, a party, directly or indirectly,
to any material contract, lease, arrangement or transaction relating to its STC
Stations, whether for the purchase, lease or sale of property, for the rendition
of services or otherwise, with any Affiliate of the STC Party, or any officer,
director, employee, proprietor, partner or shareholder of the STC Party
(collectively, "STC Affiliated Transactions"). None of the STC Affiliated
Transactions which are identified on Schedule 3.19 contains terms and conditions
which are in the aggregate significantly less favorable to the STC Party and as
would be obtained in a comparable arms length transaction or transaction which
would not have occurred but for the relationship between the parties.
3.20. SPECIAL PURPOSE.
Except for Liabilities incurred in connection with the organization and
incorporation of STCBV and STCBV Sub and the transactions contemplated by this
Agreement and the Sinclair Agreement, neither STCBV nor STCBV Sub has not
incurred, directly or indirectly, any Liabilities or engaged in any business
activities of any type whatsoever or entered into any agreements or arrangements
with any Person.
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3.21. AVAILABILITY OF FUNDS.
STC will have available on the Closing Date sufficient funds to enable
it to consummate the transactions contemplated hereby and repay the Burlington
Financing Amount (less the Cash Consideration).
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES BY HAT
HAT represents and warrants to the STC Parties as follows:
4.1. ORGANIZATION AND STANDING.
HAT is duly organized, validly existing and in good standing under the
laws of the state of its organization and is or will be prior to the Closing
Date duly qualified to do business and is or will be prior to the Closing Date
in good standing in any jurisdiction where the HAT Stations are located and
operated and in each other jurisdiction where and at such time as such
qualification is necessary, except for those jurisdictions where the failure to
be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on the HAT Stations. HAT has the corporate power and authority
to own, lease and otherwise to hold and operate the HAT Assets, to carry on the
business of the HAT Stations as now conducted, and to enter into and perform the
terms of this Agreement, the HAT Documents to which HAT is a party and the
transactions contemplated hereby and thereby.
4.2. AUTHORIZATION.
The execution, delivery and performance of this Agreement and of the HAT
Documents to which HAT is a party, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action (none of which actions has been modified or rescinded
and all of which actions are in full force and effect). This Agreement
constitutes, and upon execution and delivery of the HAT Documents to which HAT
is a party will constitute, valid and binding agreements and obligations of HAT,
enforceable against HAT in accordance with their respective terms, except as the
same may be limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws of general applicability relating to or affecting creditors'
rights generally and by the application of general principles of equity.
4.3. COMPLIANCE WITH LAWS.
To HAT's knowledge, HAT is in material compliance with all Laws
applicable to the HAT Assets and to the business and operations of the HAT
Stations. HAT has obtained and holds all material permits, licenses and
approvals (none of which has been modified or
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rescinded and all of which are in full force and effect) from all Governmental
Authorities necessary in order to conduct the operations of the HAT Stations as
presently conducted.
4.4. CONSENTS AND APPROVALS; NO CONFLICTS.
4.4.1. The execution and delivery of this Agreement, and the
performance of the transactions contemplated herein by HAT, will not require any
consent, approval, authorization or other action by, or filing with or
notification to, any Person or Governmental Authority, except as follows: (a)
filings required under Hart-Scott-Rodino, (b) consents to the assignment of the
FCC Licenses by the FCC, (c) filings, if any, with respect to real estate
transfer taxes, (d) certain of the Station Contracts may be assigned only with
the consent of third parties, as specified in Schedule 4.4, (e) filings with the
Securities and Exchange Commission, and (f) under H-A's indenture for certain of
H-A's bonds, H-A's Board of Directors must deliver to the trustee a resolution
determining that the consideration to be received for the HAT Stations is fair
market value and under H-A's bank credit agreement, H-A may not acquire
additional television stations unless H-A delivers certain certificates and
environmental reports to the agent bank as well as evidence that H-A will not
become liable for material Tax or ERISA liabilities as a result of such
acquisition.
4.4.2. Assuming all consents, approvals, authorizations and
other actions described in Section 4.4.1 have been obtained and all filings and
notifications described in Section 4.4.1 have been made, the execution, delivery
and performance of this Agreement and the HAT Documents to which HAT is a party
do not and will not (a) conflict with or violate in any material respect any Law
applicable to HAT, the HAT Assets or HAT Stations or by which any of the HAT
Assets or HAT Stations is subject or affected, (b) conflict with or result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) of any of HAT's Station Contracts or other
material agreements to which HAT is a party or by which HAT is bound or to which
any of the HAT Assets or HAT Stations is subject or affected, (c) result in the
creation of any Encumbrance upon the HAT Assets, or (d) conflict with or violate
the organizational documents of HAT.
4.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
4.5.1. HAT has provided to the STC Parties unaudited balance
sheets of the HAT Stations as of December 31, 1997 (the "HAT Balance Sheets"),
and unaudited statements of income and operating cash flows for the HAT Stations
for the twelve (12) month period ending December 31, 1997. Such financial
statements (a) present fairly in all material respects the financial condition
of the HAT Stations as of the date and the results of operations and operating
cash flows for the period indicated, and (b) have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
(except that the financial statements referred to in this Section 4.5.1 do not
contain all footnotes and cash flow information from investing and financing
activities required under generally accepted accounting principles and are
subject to customary year-end adjustments). To the knowledge of HAT, the
Accounts Receivable of HAT shown on the balance sheets described in this Section
4.5 and the
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WDTN Receivables have been collected or are collectible in amounts not less
than the amounts thereof carried on the books of HAT, except to the extent of
the allowance for doubtful accounts shown on such balance sheets.
4.5.2. There exist no Liabilities of the HAT Stations relating
to, or arising out of, the business or operations of the HAT Stations,
contingent or absolute, matured or unmatured, known or unknown, except (a) as
reflected on the HAT Balance Sheets and (b) for Liabilities that (i) were
incurred after the Current Balance Sheet Date in the Ordinary Course of
Business, or (ii) were not required to be reflected on the Balance Sheets of HAT
in accordance with generally accepted accounting principles applied on a
consistent basis.
4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth and described in Schedule 4.6, since the Current
Balance Sheet Date, there has been no Material Adverse Effect on the HAT
Stations. Since the Current Balance Sheet Date, the business of the HAT
Stations has been conducted in the Ordinary Course of Business, and HAT has not,
with respect to the HAT Stations or HAT Assets, (a) incurred any extraordinary
loss of, or injury to, any of the HAT Assets as the result of any fire,
explosion, flood, windstorm, earthquake, labor trouble, riot, accident, act of
God or public enemy or armed forces, or other casualty; (b) incurred, or become
subject to, any Liability, except current Liabilities incurred in the Ordinary
Course of Business; (c) discharged or satisfied any Encumbrance or paid any
Liability other than current Liabilities shown in the HAT Balance Sheets,
current Liabilities incurred since the Current Balance Sheet Date in the
Ordinary Course of Business, and Liabilities (including, without limitation,
partial and complete prepayments) arising under any credit or loan agreement
between HAT and its lenders; (d) mortgaged, pledged or subjected to any
Encumbrance any of the HAT Assets (except for Permitted Encumbrances); (e) made
any material change in any method of accounting or accounting practice; (f)
sold, leased, assigned or otherwise transferred any of its material HAT Assets
other than obsolete HAT Assets which have been replaced by suitable
replacements; (g) made any material increase in compensation or benefits payable
to any employee other than in the Ordinary Course of Business; or (h) made any
agreement to do any of the foregoing.
4.7. ABSENCE OF LITIGATION.
As of the date hereof, except as set forth in Schedule 4.7, there is no
material or, to HAT's knowledge, immaterial action, suit, investigation, claim,
arbitration, litigation or similar proceeding, nor any order, decree or judgment
pending or, to HAT's knowledge, threatened against HAT, the HAT Assets or HAT
Stations before any Governmental Authority.
4.8. ASSETS.
Except for the HAT Excluded Assets, the HAT Assets include all of the
assets or property used or useful in the businesses of the HAT Stations as
presently operated. Except for leased or licensed HAT Assets, HAT is the owner
of, and has good title to, the HAT Assets
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free and clear of any Encumbrances, except for Permitted Encumbrances
(including, without limitation, those items set forth on Schedule 4.8). At the
Closing, the STC Exchange Entities shall acquire good title to, and all right,
title and interest in and to the HAT Assets, free and clear of all Encumbrances,
except for the Permitted Encumbrances.
4.9. FCC MATTERS.
4.9.1. HAT holds the FCC Licenses listed as held by HAT on
Schedule 2.3.1. The FCC Licenses of HAT contained on Schedule 2.3.1 constitute
all of the licenses, permits and authorizations from the FCC that are required
for the business and operations of WDTN and WNAC. Except as set forth on
Schedule 4.9, such FCC Licenses are valid and in full force and effect through
the dates set forth on Schedule 2.3.1, unimpaired by any condition, other than
as set forth in such FCC Licenses. Except as set forth on Schedule 4.9, no
application, action or proceeding is pending for the renewal or modification of
any of HAT's FCC Licenses, and, except for actions or proceedings affecting
television broadcast stations generally, no application, complaint, action or
proceeding is pending or, to HAT's knowledge, threatened that may result in the
(a) the revocation, modification, non-renewal or suspension of any of HAT's FCC
Licenses, or (b) the issuance of a cease-and-desist order. Except as set forth
in Schedule 4.9, HAT has no knowledge of any facts, conditions or events
relating to HAT or the HAT Stations that would reasonably be expected to cause
the FCC to revoke any of the FCC Licenses for the HAT Stations or not to grant
any pending applications for renewal of any FCC Licenses for the HAT Stations or
to deny the assignment of the FCC Licenses of HAT to STC License Company as
provided for in this Agreement.
4.9.2. Except as disclosed in Schedule 4.9, HAT is, and
pending the Closing will remain legally, financially and otherwise qualified
under the Communications Act and all rules, regulations and policies of the FCC
to acquire and operate the STC Stations. Except as disclosed in Schedule 4.9,
there are no facts or proceedings which would reasonably be expected to
disqualify HAT under the Communications Act or otherwise from acquiring or
operating any of the STC Stations or would cause the FCC not to approve the
assignment of the FCC Licenses of STC License Company to HAT. Except as
disclosed in Schedule 4.9, HAT has no knowledge of any fact or circumstance
relating to HAT or any Affiliate of HAT that would reasonably be expected to (a)
cause the filing of any objection to the assignment of the FCC Licenses for the
STC Stations from STC License Company to HAT, or (b) lead to a delay in the
processing by the FCC of the applications for such assignment. Except as
disclosed in Schedule 4.9 and except for existing waivers pertaining to the STC
Stations, no waiver of any FCC rule or policy is necessary to be obtained for
the grant of the applications for the assignment of the FCC Licenses for the STC
Stations from STC License Company to HAT, nor will processing pursuant to any
exception or rule of general applicability be requested or required in
connection with the consummation of the transactions herein.
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4.10. REAL PROPERTY.
4.10.1. HAT has good and marketable fee simple title to all
fee estates included in the Real Property of HAT and good title to all other
owned Real Property of HAT, in each case free and clear of all Encumbrances,
except for Permitted Encumbrances (including, without limitation, those items
listed on Schedule 4.10).
4.10.2. HAT has a valid leasehold interest in all Leased
Property listed as leased by HAT in Schedule 2.3.2. Schedule 2.3.2 lists all
leases and subleases pursuant to which any of such Leased Property is leased by
HAT in connection with the business and operations of the HAT Stations. HAT is
the owner and holder of all such Leased Property purported to be granted by such
leases and subleases. Each such lease and sublease is valid as to HAT
thereunder and, to HAT's knowledge valid as to any other party thereto, and is
in full force and effect and, to HAT's knowledge, constitutes a legal and
binding obligation of, and is legally enforceable against HAT and each other
party thereto and grants the leasehold interest it purports to grant, including
any rights to nondisturbance and peaceful and quiet enjoyment that may be
contained therein. The lessees and sublessees are, and to the knowledge of HAT,
all other parties are, in compliance in all material respects with the
provisions of such leases and subleases.
4.10.3. The Real Property and the Leased Property of HAT
listed in Schedule 2.3.2 constitute all of the real property owned, leased or
used in the business and operations of the HAT Stations which is material to the
business and operations of the HAT Stations.
4.10.4. No portion of the Real Property of HAT or any
building, structure, fixture or improvement thereon is the subject of, or
affected by, any condemnation, eminent domain or inverse condemnation proceeding
currently instituted or pending or, to the knowledge of HAT, threatened. To the
knowledge of HAT, and to the extent that such documents are in the possession of
HAT, HAT has delivered to STC true, correct and complete copies of the following
documents with respect to its Real Property and Leased Property as identified in
Schedule 4.10: (i) deeds, by which HAT has received a fee interest in any of
such Real Property; (ii) leases for all of its Leased Property; (iii) title
insurance policies or commitments; (iv) surveys; and (v) inspection reports or
other instruments or reports, including, without limitation, any phase I or
phase II environmental reports or other similar environmental reports, surveys
or assessments (including any and all amendments and other modifications of such
instruments).
4.11. INTELLECTUAL PROPERTY.
HAT possesses adequate rights, licenses and authority to use all
Intellectual Property necessary to conduct the business of the HAT Stations as
presently conducted. HAT has good title to all Intellectual Property
maintained, owned, leased or used in connection with the business and operations
of the HAT Stations, free and clear of any Encumbrances, except for Permitted
Encumbrances. HAT is not obligated to pay any royalty or other fees to anyone
with
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respect to the Intellectual Property of HAT. HAT has not received any written
notice to the effect that any service rendered by HAT relating to the business
of the HAT Stations may infringe, or that HAT is otherwise infringing, on any
intellectual property right or other legally protectable right of another. No
director, officer or employee of HAT has any interest in any Intellectual
Property.
4.12. STATION CONTRACTS.
Complete and correct copies of Station Contracts of HAT set forth in
Schedules 2.3.5, 2.3.6, 2.3.8 and 2.3.9 (which schedules, as to HAT, are true
and correct in all material respects) have been made available to STC and (a)
each such material Station Contract and, to HAT's knowledge, each such
immaterial Station Contract, is in full force and effect and constitutes a
legal, valid and binding obligation of HAT, and, to HAT's knowledge, of each
other party thereto; (b) HAT is not in breach or default in any material respect
of the terms of any such Station Contract; (c) none of the material rights of
HAT under any such Station Contract will be subject to termination, nor will a
default occur, as a result of the consummation of the transactions contemplated
hereby, except to the extent that failure to obtain the prior consent to
assignment thereof of any party thereto shall or could be interpreted to
constitute a termination or modification of or a default under any such Station
Contract; and (d) to the knowledge of HAT, no other party to any such Station
Contract is in breach or default in any material respect of the terms
thereunder.
4.13. TAXES.
HAT has (or, in the case of returns becoming due after the date hereof
and on or before the Closing Date, will have prior to the Closing Date) duly
filed all material Tax Returns required to be filed by HAT on or before the
Closing Date with respect to all material applicable Taxes. In the case of any
such Tax Returns which receive an extension for their date of filing, such Tax
Returns will be considered due on, and not considered required to be filed
before, the extended due date. All such Tax Returns are (or, in the case of
returns becoming due after the date hereof and on or before the Closing Date,
will be) true and complete in all material respects. HAT has: (a) paid all
Taxes due to any Governmental Authority as indicated on such Tax Returns; or (b)
established (or, in the case of amounts becoming due after the date hereof,
prior to the Closing Date will have established) adequate reserves (in
conformity with generally accepted accounting principles consistently applied)
for the payment of such Taxes.
4.14. EMPLOYEE BENEFIT PLANS.
4.14.1. Schedule 4.14 lists all Plans and Benefit Arrangements
maintained by or contributed to by HAT for the benefit of the employees of the
HAT Stations (collectively referred to as "HAT Benefit Plans") (the STC Benefit
Plans and the HAT Benefit Plans are sometimes individually referred to herein as
the "Benefit Plans"). Each HAT Benefit Plan has been maintained in material
compliance with its terms and with ERISA, the Code and other applicable Laws.
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4.14.2. Schedule 4.14 sets forth a list of all Qualified Plans
maintained by or contributed to by HAT for the benefit of the employees of the
HAT Stations. All such Qualified Plans and any related trust agreements or
annuity agreements (or any other funding document) have been maintained in
material compliance with ERISA and the Code (including, without limitation, the
requirements for tax qualification described in Section 401 thereof), other than
any Multiemployer Plan. To HAT's knowledge, any trusts established under such
Plans are exempt from federal income taxes under Section 501(a) of the Code.
4.14.3. Schedule 4.14 lists all funded Welfare Plans of HAT
that provide benefits to current or former employees of the HAT Stations or its
beneficiaries. To HAT's knowledge, the funding under each such Welfare Plan
does not exceed and has not exceeded the limitations under Sections 419A(b) and
419A(c) of the Code. To HAT's knowledge, HAT is not subject to taxation on the
income of any such Welfare Plan's welfare benefit fund (as such term is defined
in Section 419(e) of the Code) under Section 419A(g) of the Code.
4.14.4. HAT has no post-retirement medical, life insurance or
other benefits promised, provided or otherwise due now or in the future to
current, former or retired employees of the HAT Stations.
4.14.5. To HAT's knowledge, except as set forth in Schedule
4.14, HAT has (a) filed or caused to be filed all returns and reports on HAT's
Plans that they are required to file and (b) paid or made adequate provision for
all fees, interest, penalties, assessments or deficiencies that have become due
pursuant to those returns or reports or pursuant to any assessment or adjustment
that has been made relating to those returns or reports. All other fees,
interest, penalties and assessments that are payable by or for HAT have been
timely reported, fully paid and discharged. There are no unpaid fees,
penalties, interest or assessments due from HAT or from any other person that
are or could become an Encumbrance on any of the HAT Assets or could otherwise
adversely affect the businesses of the HAT Stations or HAT Assets. To HAT's
knowledge, HAT has collected or withheld all amounts that are required to be
collected or withheld by it to discharge its obligations, and all of those
amounts have been paid to the appropriate Governmental Authority or set aside in
appropriate accounts for future payment when due. HAT has furnished to STC true
and complete copies of all documents setting forth the terms and funding of each
of HAT's Plans.
4.14.6. Except as set forth in Schedule 4.14, neither HAT nor
any ERISA Affiliate of HAT has ever sponsored or maintained, had any obligation
to sponsor or maintain, or had any liability (whether actual or contingent, with
respect to any of its assets or otherwise) with respect to any of HAT's Plans
subject to Section 302 of ERISA or Section 412 of the Code or Title IV of ERISA
(including any Multiemployer Plan). Neither HAT nor any ERISA Affiliate of HAT
(since January 1, 1989) has terminated or withdrawn from or sought a funding
waiver with respect to any plan subject to Title IV of ERISA, and no facts exist
that could reasonably be expected to cause such actions in the future; no
accumulated funding deficiency (as defined in Code Section 412), whether or not
waived, exists with respect to any such plan; no reportable event (as defined in
ERISA Section 4043) has occurred with respect to any such plan (other than
events for which reporting is waived); all costs of any such plans have been
provided
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for on the basis of consistent methods in accordance with sound actuarial
assumptions and practices, and the assets of each such plan, as of its last
valuation date, exceeded its "Benefit Liabilities" (as defined in ERISA Section
4001(a)(16)); and, since the last valuation date for each such plan, no such
plan has been amended or changed to increase the amounts of benefits thereunder
and, to the knowledge of HAT, there has been no event that would reduce the
excess of assets over benefit liabilities; and except as set forth in Schedule
4.14, neither HAT nor any ERISA Affiliate of HAT has ever made or been obligated
to make, or reimbursed or been obligated to reimburse another employer for,
contributions to any Multiemployer Plan of HAT.
4.14.7. No claims (other than for benefits in the Ordinary
Course of Business) or lawsuits are pending or, to the knowledge of HAT,
threatened by, against, or relating to any of its Benefit Plans. To HAT's
knowledge, the HAT Benefit Plans are not presently under audit or examination
(nor has notice been received of a potential audit or examination) by the IRS,
the Department of Labor, or any other governmental agency or entity and no
matters are pending with respect to any Qualified Plan of HAT under the IRS's
Voluntary Compliance Resolution program, its Closing Agreement Program, or other
similar programs.
4.14.8. With respect to each Plan of HAT, there has occurred
no non-exempt "prohibited transaction" (within the meaning of Section 4975 of
the Code) or transaction prohibited by Section 406 of ERISA or breach of any
fiduciary duty described in Section 404 of ERISA that would, if successful,
result in any liability for HAT.
4.14.9. HAT has no liability with respect to any employee
benefit plan of HAT that is not a HAT Benefit Plan (exclusive of severance
arrangements and retention agreements) or with respect to any employee benefit
plan sponsored or maintained (or which has been or should have been sponsored or
maintained or with respect to which there has been an obligation to do so) by
any ERISA Affiliate of HAT.
4.14.10. All group health plans of HAT and its ERISA
Affiliates covering any current or former employees of the HAT Stations have
been operated in material compliance with the requirements of Sections 4980B
(and its predecessor) and 5000 of the Code, and HAT has provided, or will have
provided before the Closing Date, to individuals entitled thereto all required
notices and coverage pursuant to Section 4980B with respect to any "qualifying
event" (as defined therein) occurring before or on the Closing Date.
4.15. LABOR RELATIONS.
Schedule 4.15 contains a true and complete list of all employees engaged
in the business or operations of the HAT Stations as of the date set forth on
the list, together with such employee's position, salary and date of hire.
Schedule 4.15 lists all written employment contracts with any such employees and
all written agreements, plans, arrangements, commitments and understandings
pursuant to which HAT has severance obligations with respect to such employees.
Except as set forth on Schedule 4.15, no labor union or other collective
bargaining unit represents or, to HAT's knowledge, claims to represent, any of
the employees of the HAT Stations. There are no strikes, work stoppages,
grievance proceedings, union
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organization efforts, or other controversies pending between HAT and any union
or collective bargaining unit representing (or, to HAT's knowledge, claiming to
represent) any employees of the HAT Stations. HAT is in compliance with all
Laws relating to the employment of employees of the HAT Stations or the
workplace of the HAT Stations, including, without limitation, provisions
relating to wages, hours, collective bargaining, safety and health, work
authorization, equal employment opportunity, immigration and the withholding of
income taxes, unemployment compensation, worker's compensation, employee privacy
and right to know and social security contributions, except for any
noncompliance which would not have a Material Adverse Effect on the HAT
Stations. Except as set forth on Schedule 4.15, there are no collective
bargaining agreements relating to the HAT Stations or the business and
operations thereof.
4.16. ENVIRONMENTAL MATTERS.
4.16.1. Schedule 4.16 contains a true and complete list and
brief summary of all material reports, audits and other documents relating to
the environmental condition of the Real Property of HAT in HAT's possession.
4.16.2. Except as set forth in Schedule 4.16, to the knowledge
of HAT (which knowledge is based on the items set forth on Schedule 4.16), HAT
is in material compliance with, and the Real Property of HAT and all
improvements thereon are in material compliance with, all Environmental Laws.
4.16.3. Except as set forth in Schedule 4.16, there are no
pending or, to the knowledge of HAT, threatened actions, suits, claims, or other
legal proceedings based on (and HAT has not received any written notice of any
complaint, order, directive, citation, notice of responsibility, notice of
potential responsibility, or information request from any Governmental Authority
arising out of or attributable to): (a) the current or past presence at any
part of HAT's Real Property of Hazardous Materials; (b) the current or past
release or threatened release into the environment from HAT's Real Property
(including, without limitation, into any storm drain, sewer, septic system or
publicly owned treatment works) of any Hazardous Materials; (c) the off-site
disposal of Hazardous Materials originating on or from HAT's Real Property or
the HAT Assets or businesses of the HAT Stations; (d) any facility operations or
procedures of the HAT Stations which do not conform to requirements of the
Environmental Laws; or (e) any violation of Environmental Laws at any part of
HAT's Real Property arising from activities of the HAT Stations involving
Hazardous Materials. To the knowledge of HAT, HAT has been duly issued all
material permits, licenses, certificates and approvals required under any
Environmental Law.
4.17. INSURANCE.
Schedule 4.17 contains a true and complete list and brief summary of all
policies of title, property, fire, casualty, liability, life, workmen's
compensation, libel and slander, and other forms of insurance of any kind
relating to the HAT Assets or the business and operations of the HAT Stations.
All such policies: (a) are in full force and effect; (b) are
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sufficient for compliance in all material respects with all requirements of Law
and of all material agreements to which HAT is a party; and (c) to HAT's
knowledge, are valid, outstanding, and enforceable policies and the policy
holder is not in default in any material respect thereunder.
4.18. REPORTS.
All material returns, reports and statements that the HAT Stations are
currently required to file with the FCC or any governmental agency have been
timely filed, and all reporting requirements of the FCC and other governmental
authorities having jurisdiction thereof have been complied with in all material
respects. All of such reports, returns and statements are complete and correct
in all material respects as filed. To HAT's knowledge, all documents required
by the FCC to be deposited by HAT in its public files (as defined in the rules
and regulations of the FCC) during the period of operation of the HAT Stations
by HAT have been deposited therein.
4.19. AFFILIATED TRANSACTIONS.
Except as set forth in Schedule 4.19, HAT is not now, and during the
past three (3) years has not been, a party, directly or indirectly, to any
material contract, lease, arrangement or transaction relating to the HAT
Stations, whether for the purchase, lease or sale of property, for the rendition
of services or otherwise, with any Affiliate of HAT, or any officer, director,
employee, proprietor, partner or shareholder of HAT (collectively, "HAT
Affiliated Transactions") (STC Affiliated Transactions and HAT Affiliated
Transactions are sometimes collectively referred to herein as the "Affiliated
Transactions"). None of the HAT Affiliated Transactions which are identified on
Schedule 4.19 contains terms and conditions which are in the aggregate
significantly less favorable to HAT and as would be obtained in a comparable
arms length transaction or transaction which would not have occurred but for the
relationship between the parties.
ARTICLE 5.
PRE-CLOSING FILINGS
5.1. APPLICATIONS FOR FCC CONSENT.
Within five (5) business days following the execution of this Agreement,
the parties hereto shall jointly file applications for the Stations with the FCC
requesting consent to the assignment of the FCC Licenses for the Stations as
contemplated herein (the "FCC Applications"). Each party hereto will diligently
take, or fully cooperate in the taking of, all necessary and proper steps, and
provide any additional information reasonably requested in order to obtain
promptly the requested consents and approvals of the FCC Applications by the
FCC.
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5.2. HART-SCOTT-RODINO.
Within five (5) business days following the execution of this Agreement,
the parties hereto shall complete any filing that may be required pursuant to
Hart-Scott-Rodino (each an "HSR Filing"). Each party hereto shall diligently
take, or fully cooperate in the taking of, all necessary and proper steps, and
provide any additional information reasonably requested in order to comply with,
the requirements of Hart-Scott-Rodino.
5.3. NON-REQUIRED ACTIONS.
No party hereto shall have any obligation to take any steps pursuant to
Section 5.1 or Section 5.2 which would require the divestiture of any business
or assets of any party hereto or any Affiliate thereof.
ARTICLE 6.
COVENANTS AND AGREEMENTS OF THE PARTIES
Each party covenants and agrees with the other party as follows:
6.1. NEGATIVE COVENANTS.
Pending and prior to the Closing, such party will not without the prior
written consent of the other party (which consent will not be unreasonably
withheld, delayed or conditioned, except in the case of matters referred to in
Sections 6.1.7, 6.1.9 and 6.1.11, with respect to which the other party's
consent may be withheld in its sole and absolute discretion), do or agree to do
any of the following:
6.1.1. DISPOSITIONS; MERGERS.
Sell, assign, lease or otherwise transfer or dispose of any of such
party's Assets other than at substantially fair market value and in the Ordinary
Course of Business; or merge or consolidate with or into any other entity or
enter into any contracts or agreements relating thereto.
6.1.2. ACCOUNTING PRINCIPLES AND PRACTICES.
Change or modify any accounting principles or practices or any method of
applying such principles or practices.
6.1.3. TRADE-OUT AGREEMENTS.
(a) As to WPTZ and WNNE, enter into or renew any
Trade-out Agreement (excluding any film barter agreements) that would be binding
on the other party after the Closing Date, except in the Ordinary Course of
Business and which requires the provision of broadcast time having a value of
less than (a) Twenty-Five Thousand Dollars ($25,000)
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individually, and (b) together with existing Trade-out Agreements still in
effect as of the Closing Date, Two Hundred Fifty Thousand Dollars ($250,000) in
the aggregate as of the Closing Date.
(b) As to KSBW and WDTN, enter into or renew any Trade-out Agreements
(excluding any film barter agreements) that would be binding on the other party
after the Closing Date, except in the Ordinary Course of Business which requires
the provision of broadcast time having the value of less than Five Thousand
Dollars ($5,000) individually and together with existing Trade-out Agreements
still in effect as of the Closing Date, Fifty Thousand Dollars ($50,000) in the
aggregate as of the Closing Date.
6.1.4. BROADCAST TIME SALES AGREEMENTS.
Enter into or renew any Time Sales Agreement except in the Ordinary
Course of Business and which are for cash at prevailing rates for a term not
exceeding twelve (12) months.
6.1.5. NETWORK AFFILIATION AGREEMENTS AND TBAS.
Acquire or enter into or renew any TBA or network affiliation agreement.
6.1.6. ADDITIONAL AGREEMENTS.
Acquire or enter into any new Station Contracts not referred to in
Sections 6.1.3, 6.1.4 or 6.1.5 above, or renew, extend, amend, alter, modify or
otherwise change any existing Station Contract, except in the Ordinary Course of
Business (collectively, "Additional Agreements"); provided, however, such party
shall not enter into (a) any Program Contract for any Station which will be
binding on the other party after the Closing Date, or (b) any other Station
Contract requiring payments by such party under each Station Contract in excess
of Five Thousand Dollars ($5,000) or Seventy-Five Thousand Dollars ($75,000) in
the aggregate.
6.1.7. BREACHES.
Do or omit to do any act which will cause a material breach of any
Station Contract.
6.1.8. EMPLOYEE MATTERS.
(a) Enter into or become subject to any employment, labor, union, or
professional service contract not terminable at will, or any bonus, pension,
insurance, profit sharing, incentive, deferred compensation, severance pay,
retirement, hospitalization, employee benefit, or other similar plan; or
increase the compensation payable or to become payable to any employee, or pay
or arrange to pay any bonus payment to any employee, except in the Ordinary
Course of Business.
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(b) As to KSBW and WDTN, hire, retain or offer employment to any new
employees.
6.1.9. ACTIONS AFFECTING FCC LICENSES.
Take any action which may jeopardize the validity or enforceability of
or rights under any FCC Licenses.
6.1.10. PROGRAMMING.
Program or broadcast any Program Contract or syndicated program, except
in the Ordinary Course of Business and consistent with the terms and conditions
of such Program Contracts.
6.1.11. ENCUMBRANCES.
Create, assume or permit to exist any Encumbrances upon any of the
Assets except for Permitted Encumbrances and Encumbrances that will be
discharged prior to or on the Closing Date.
6.1.12. TRANSACTIONS WITH AFFILIATES.
Enter into any transaction with any Affiliate of such party that will be
binding upon the other party on or after the Closing Date, except for
transactions not otherwise prohibited by this Section 6.1 and transactions
between and among Stations operating in the same DMA in the Ordinary Course of
Business, in each case on arm's length terms.
6.2. AFFIRMATIVE COVENANTS.
Pending and prior to the Closing, each party will:
6.2.1. PRESERVE EXISTENCE.
Preserve its corporate existence and business organization intact,
maintain its existing franchises and licenses, use commercially reasonable
efforts to preserve for the other party the relationships of its Stations with
suppliers, customers, employees and others with whom its Stations have business
relationships, and keep all of its Assets substantially in their present
condition, ordinary wear and tear excepted.
6.2.2. NORMAL OPERATIONS.
Subject to the terms and conditions of this Agreement (including,
without limitation, Section 6.1), (a) carry on the businesses and activities of
its Stations, including without limitation, promotional activities, the sale of
advertising time, entering into other contracts and agreements, or purchasing
and scheduling of programming, in the Ordinary Course of Business; (b) pay or
otherwise satisfy all obligations (cash and barter) of its Stations in
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the Ordinary Course of Business; provided, however, such party shall cause to
be brought current as of the Closing Date all payments that are due and payable
under its Station Contracts as originally contracted; (c) maintain books of
account, records, and files with respect to the business and operations of its
Stations in substantially the same manner as heretofore; and (d) maintain its
Assets in customary repair, maintenance and condition, except to the extent of
normal wear and tear, and repair or replace, consistently with the Ordinary
Course of Business, any of its Assets that may be damaged or destroyed;
notwithstanding the foregoing, each party acknowledges that the other party
shall not be obligated to spend any funds on capital expenditures after the date
hereof, except for the repair or replacement of its Assets that may be damaged
or destroyed or to comply with improvements required pursuant to the
environmental remediation described in Section 6.16.
6.2.3. MAINTAIN FCC LICENSES.
Maintain the validity of its FCC Licenses, and comply in all material
respects with all requirements of such FCC Licenses and the rules and
regulations of the FCC.
6.2.4. NETWORK AFFILIATION.
Use best efforts to maintain in full force and effect the present
network affiliation agreements for its Stations (and any and all modifications
and renewals thereof).
6.2.5. STATION CONTRACTS.
Pay and perform obligations in the Ordinary Course of Business under its
Station Contracts and under any Additional Agreements that shall be entered into
by such party pursuant to Section 6.1.6, in accordance with the respective terms
and conditions of such Station Contracts.
6.2.6. TAXES.
Pay or discharge all Taxes when due and payable.
6.2.7. ACCESS.
Prior to the Closing and for a period of five (5) years after the
Closing Date (and to the extent permitted by the Clear Channel Agreements in the
case of HAT and to the extent permitted by the Heritage Agreement and the
Sinclair Agreement in the case of STC), cause to be afforded to representatives
of the other party reasonable access during normal business hours to offices,
properties, assets, books and records, contracts and reports of its Stations, as
the other party shall from time to time reasonably request; provided, however,
that (a) such investigation shall only be upon reasonable notice and shall not
unreasonably disrupt the personnel or operations of either party or its
Stations, and (b) under no circumstances shall either party be required to
provide access to the other party or any representative of the other party (i)
any information or materials subject to confidentiality agreements with third
parties required
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to be kept confidential by applicable Laws, or (ii) any privileged
attorney-client communications or attorney work product. All requests for
access to the offices, properties, assets, books and records, contracts and
reports of the Stations of either party shall be made to such representatives as
such party shall designate, who shall be solely responsible for coordinating all
such requests and all access permitted hereunder. Each party acknowledges and
agrees that neither it nor its representatives shall contact any of the
employees, customers, suppliers, partners, or other associates or Affiliates of
the other party, in connection with the transactions contemplated hereby,
whether in person or by telephone, mail or other means of communication, without
the specific prior written authorization of such representatives of the other
party. Subject to and in accordance with the terms of this Section 6.2.7, each
party shall cooperate in all reasonable respects with the other party's request
to conduct an audit of such party's financial information as the other party may
reasonably determine is necessary to satisfy the other party's public company
reporting requirements pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934 including, without limitation, (a) using commercially
reasonable efforts to obtain the consent of such party's auditors to permit the
other party and the other party's auditors to have access to such auditors' work
papers, and (b) consenting to such access by the other party. All costs and
expenses incurred in connection with the preparation of (and assimilation of
relevant information for) any such financial statements shall be paid by the
requesting party.
6.2.8. INSURANCE.
Maintain in full force and effect all of its existing casualty,
liability, and other insurance in amounts not less than those in effect on the
date hereof.
6.2.9. FINANCIAL STATEMENTS.
Provide the other party with unaudited monthly statements of assets and
liabilities relating to the business and operations of its Stations, and monthly
statements of revenues and expenses reflecting the results of business and
operations of its Stations for January 31, 1998 and for each month thereafter,
within thirty (30) days after the end of each such month. Such party further
agrees to provide the other party with weekly sales pacing reports for its
Stations.
6.2.10. CONSENTS.
(a) Take all reasonable action required to obtain all consents,
approvals and agreements of any third parties necessary to authorize, approve or
permit the consummation of the transactions contemplated by this Agreement,
including, without limitation, any consent of the parties to the Station
Contracts designated as necessary in Schedule 3.4 and Schedule 4.4, as
applicable, in order to consummate the transactions contemplated hereby
(collectively, the "Restricted Contracts"). Notwithstanding anything to the
contrary set forth in this Agreement or otherwise, to the extent that the
consent or approval of any third party is required under any Restricted
Contract, the party to such Restricted Contract shall only be required to use
reasonable efforts (not involving the payment by such party of any money to any
party to any such Restricted Contract) to obtain such consents and approvals,
and
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in the event that such party fails to obtain any such consent or approval, the
other party shall have no right to terminate this Agreement.
(b) Notwithstanding anything to the contrary in clause (a) above, each
party shall retain, until such time as any required consents shall have been
obtained by such party, all rights to and under any Station Contract to which it
is a party which requires the consent of any other party thereto for assignment
to the other party if such consent has not been obtained on the Closing Date
(the "Deferred Contract"). Until the assignment of the Deferred Contract, (i)
the party thereto shall continue to use all commercially reasonable efforts and
the other party shall cooperate to obtain the consent and/or to remove any other
impediments to such assignment, and (ii) the parties agree to cooperate in any
lawful arrangement to provide (to the extent permitted without breach of such
Deferred Contract) that the other party shall receive the benefits of such
interest after the Closing Date to the same extent as if it were the party
thereunder. If, subsequent to the Closing Date, the party to a Deferred
Contract shall obtain required consents to assign such Deferred Contract to the
other party, such Deferred Contract for which consent to assign has been
obtained shall at that time be deemed to be conveyed, granted, bargained, sold,
transferred, setover, assigned, released, delivered and confirmed to the other
party, without need of further action or of future documentation.
6.2.11. CORPORATE ACTION.
Take all corporate action (including, without limitation, all
shareholder action), under the Law of any state having jurisdiction over such
party necessary to effectuate the transactions contemplated by this Agreement
and the other agreements to which it is a party.
6.2.12. ENVIRONMENTAL AUDIT.
Permit the other party and the other party's agents, as soon as
practical after the date hereof and upon the other party's request therefor,
access to the Real Property of such party and the Leased Property of such party
for the purpose of conducting, at the other party's expense, Phase I and Phase
II environmental audits. Any such environmental audits shall be conducted by a
reputable environmental investigatory firm of the other party's choice subject
to the reasonable approval of such party and in a manner as will not
unreasonably interfere with the normal business and operations of any of the
Stations.
6.2.13. SINCLAIR AGREEMENT.
As to STC, STC shall consummate the acquisition of the Burlington
Stations in accordance with the provisions of the Sinclair Agreement and
promptly enforce all rights and remedies available to STC pursuant to the
Sinclair Documents.
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6.3. CONFIDENTIALITY.
The Recipient Party shall, at all times, maintain strict confidentiality
with respect to all documents and information furnished to such party by or on
behalf of the Transferring Party. Nothing shall be deemed to be confidential
information that: (a) is known to the Recipient Party at the time of its
disclosure to the Recipient Party; (b) becomes publicly known or available other
than through disclosure by the Recipient Party; (c) is received by the Recipient
Party from a third party not actually known by the Recipient Party to be bound
by a confidentiality agreement with or obligation to the Transferring Party; or
(d) is independently developed by the Recipient Party. Notwithstanding the
foregoing provisions of this Section 6.3, the Recipient Party may disclose such
confidential information (a) to the extent required or deemed advisable to
comply with applicable Laws; (b) to its officers, directors, employees,
representatives, financial advisors, attorneys, accountants, and agents with
respect to the transactions contemplated hereby (so long as such parties agree
to maintain the confidentiality of such information); and (c) to any
Governmental Authority in connection with the transactions contemplated hereby.
In the event this Agreement is terminated, each party will return to the other
party all documents and other material prepared or furnished by the other party
relating to the transactions contemplated hereunder, whether obtained before or
after the execution of this Agreement.
6.4. COLLECTION OF RECEIVABLES.
At the Closing, STC shall assign the Sinclair Receivables to HAT for
collection purposes only, and, within ten (10) business days after the Closing
Date, STC shall furnish to HAT a list of such Sinclair Receivables by accounts
and the amounts then owing. HAT agrees, during the period of days remaining
between the date of the STC Transfer Date and one hundred fifty (150) days from
such date (the "Sinclair Collection Period"), without any requirement to
litigate to collect such Sinclair Receivables, to use its reasonable efforts
(with at least the care and diligence HAT uses to collect its own accounts
receivable) to collect for STC such Sinclair Receivables and to remit to
Sinclair on the fifth (5th) day following the last day of each month occurring
during the Sinclair Collection Period (or, if any such day is a Saturday, Sunday
or holiday, on the next day on which banking transactions are resumed),
collections received by HAT with respect to such Sinclair Receivables. HAT
shall not make any referral or compromise of any Sinclair Receivable to a
collection agency or attorney for collection and shall not compromise for less
than full value any Sinclair Receivable without the prior written consent of
Sinclair. Any Sinclair Receivable not collected by HAT within the Sinclair
Collection Period shall revert to Sinclair. HAT shall reassign, without
recourse to Sinclair, each Sinclair Receivable and deliver to Sinclair, all
records relating thereto on the same day as HAT remits to Sinclair the
collections received. All payments in respect of the Sinclair Receivables
received during the Sinclair Collection Period shall be first applied to the
oldest balance then due on the Sinclair Receivables unless the account debtor
indicates in writing that payment is to be applied otherwise due to a dispute
over an Account Receivable. HAT agrees, upon the reasonable request of STC, to
furnish to STC and Sinclair periodic reports on the status of its Sinclair
Receivables. HAT shall have no right to set-off any amounts collected for the
Sinclair
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Receivable for any amounts owed to HAT by STC; provided, however, that HAT
shall have the right to seek indemnification in accordance with the terms and
conditions of this Agreement.
6.5. POSSESSION AND CONTROL.
Between the date hereof and the Closing Date, the Recipient Party shall
not directly or indirectly control, supervise or direct, or attempt to control,
supervise or direct, the business and operations of the Transferring Party's
Stations, and such operation, including complete control and supervision of all
programming, shall be the sole responsibility of the Transferring Party. On and
after the Closing Date, the Transferring Party shall have no control over, or
right to intervene, supervise, direct or participate in, the business and
operations of the Stations transferred to the Recipient Party.
6.6. RISK OF LOSS.
The risk of loss or damage by fire or other casualty or cause to the
Assets of the Transferring Party until the Closing Date shall be upon the
Transferring Party. In the event of loss or damage prior to the Closing Date
with respect to which the Transferring Party has adequate replacement cost
insurance and which has not been restored, replaced, or repaired as of the
Closing Date and if the Recipient Party shall proceed with the Closing, then the
Recipient Party shall receive at the Closing the insurance proceeds or an
assignment of the right to receive such insurance proceeds, as applicable, to
which the Transferring Party otherwise would be entitled, whereupon the
Transferring Party shall have no further liability to the Recipient Party for
such loss or damage.
6.7. PUBLIC ANNOUNCEMENTS.
Each party shall consult with the other party before issuing any press
release or otherwise making any public statements with respect to this Agreement
or the transactions contemplated herein and shall not issue any such press
release or make any such public statement without the prior written consent of
the other party, which shall not be unreasonably withheld; provided, however,
that a party may, without the prior written consent of the other party, issue
such press release or make such public statement as may be required by Law or
any listing agreement with a national securities exchange to which such party is
a party if it has used all reasonable efforts to consult with the other party
and to obtain such party's consent but has been unable to do so in a timely
manner.
6.8. SINCLAIR EMPLOYEE MATTERS.
6.8.1. At the Closing, HAT shall offer employment to each of
the employees of WNNE and WPTZ (including those on leave of absence, whether
short-term, long-term, family, maternity, disability, paid, unpaid or other), at
a comparable salary, position and place of employment as held by each such
employee immediately prior to the Closing Date (such employees who are given
such offers of employment and accept such offers and are employed by
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HAT are referred to herein as the "Sinclair Employees"). Nothing in this
Section 6.8.1 is intended to guarantee employment for any Sinclair Employee for
any length of time after the Closing Date.
6.8.2. Except as provided otherwise in this Section 6.8, STC
shall pay, discharge and be responsible for (a) all salary and wages arising out
of or relating to the employment of the employees of WNNE and WPTZ prior to the
Closing Date and (b) any employee benefits arising under the Benefit Plans of
STC and its Affiliates during the period prior to the Closing Date. From and
after the Closing Date, HAT shall pay, discharge and be responsible for all
salary, wages and benefits arising out of or relating to the employment of the
Sinclair Employees by HAT on and after the Closing Date. HAT shall be
responsible for all severance Liabilities, and all COBRA Liabilities for any
Sinclair Employees terminated by HAT on or after the Closing Date.
6.8.3. HAT shall cause all Sinclair Employees as of the
Closing Date to be eligible to participate in its "employee welfare benefit
plans" and "employee pension benefit plans" (as defined in Section 3(1) and 3(2)
of ERISA, respectively) to the extent required under the Sinclair Agreement.
6.8.4. For purposes of any length of service requirements,
waiting periods, vesting periods or differential benefits based on length of
service in any such plan for which a Sinclair Employee may be eligible after the
Closing, HAT shall ensure that, to the extent permitted by law, service by such
Sinclair Employee with the Heritage Subsidiaries, Sinclair, STC or any of their
respective Affiliates shall be deemed to have been service with HAT. In
addition, HAT shall ensure that each Sinclair Employee receives credit under any
welfare benefit plan of HAT for any deductibles or co-payments paid by such
Sinclair Employee and his or her dependents for the current plan year under a
plan maintained by the Heritage Subsidiaries, Sinclair, STC or any of their
respective Affiliates. HAT shall grant credit to each Sinclair Employee for all
sick leave in accordance with the policies of HAT applicable generally to its
employees after giving effect to service for STC as service for HAT. To the
extent taken into account in determining the Final Proration Amount, HAT shall
assume and discharge STC's Liabilities for the payment of all unused vacation
leave accrued by Sinclair Employees as of the Closing Date. To the extent any
claim with respect to such accrued vacation leave is lodged against STC, with
respect to any Sinclair Employee, HAT shall indemnify, defend and hold harmless
STC from and against any and all losses, directly or indirectly, as a result of,
or based upon or arising from the same.
6.8.5. As soon as practicable following the Closing Date, HAT
shall establish and maintain a defined contribution plan or plans (which may be
a preexisting plan or plans (the "HAT Retirement Plan") intended to be qualified
under Section 401(a) and 401(k) of the Code for the benefit of the Sinclair
Employees. Effective as of the Closing Date, STC shall cause appropriate
amendments to be made to its retirement savings plan (the "STC Retirement Plan")
to provide that the Sinclair Employees shall be fully vested in their accounts
under the STC Retirement Plan. As soon as practicable after the Closing Date,
HAT shall take all necessary action to qualify the HAT Retirement Plan under the
applicable provisions of the Code
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(including but not limited to Section 401), if it is not yet so qualified, and
HAT and STC shall make any and all filings and submissions to the appropriate
governmental agencies required to be made by them in connection with the
transfer of assets described hereafter. As soon as practicable following the
earlier of the receipt of a favorable determination letter from the Internal
Revenue Service regarding the qualified status of both the STC Retirement Plan
and the HAT Retirement Plan (each as amended to the date of transfer) or sooner,
if STC and HAT so agree, STC shall cause to be transferred to the HAT Retirement
Plan, in cash, all of the individual account balances of Sinclair Employees
under the STC Retirement Plan, including any outstanding plan participant loan
receivables allocated to such accounts.
6.8.6 . HAT acknowledges and agrees that its obligations
pursuant to this Section 6.8 are in addition to, and not in limitation of, HAT's
obligation to assume the employment contracts set forth on Schedule 2.3.9.
6.8.7. Except as otherwise provided in this Section 6.8 or in
any employment, severance or retention agreements of any Sinclair Employees, all
Sinclair Employees shall be at-will employees, and HAT may terminate their
employment or change their terms of employment at will. No employee (or
beneficiary of any employee) of WPTZ or WNNE may sue to enforce the terms of
this Agreement, including specifically this Section 6.8, and no employee or
beneficiary shall be treated as a third party beneficiary of this Agreement.
Except to the extent provided for herein, HAT may cover the Sinclair Employees
under existing or new benefit plans, programs, and arrangements, and may amend
or terminate any such plans, programs, or arrangements at any time.
6.9. OTHER EMPLOYEE MATTERS.
6.9.1. Except for the Sinclair Employees (who are addressed in
Section 6.8), at least five (5) days prior to the Closing Date, the Recipient
Party shall designate in writing which employees of the Transferring Party's
Stations the Recipient Party shall offer employment after the Closing Date (all
such employees shall be referred to herein as the "Designated Employees"; all
other employees shall be referred to herein as the "Non-Transferred Employees").
As of the Closing Date, the Recipient Party shall offer employment to each of
the Designated Employees (including those on leave of absence, whether
short-term, long-term, family, maternity, disability, paid, unpaid or other), on
terms and conditions set by the Recipient Party (such employees who are given
such offers of employment and accept such offers and are employed by the
Recipient Party are referred to herein as the "Transferred Employees"). Nothing
in this Section 6.9.1 is intended to guarantee employment for any Transferred
Employee for any length of time after the Closing Date.
6.9.2. Except as provided otherwise in this Section 6.9, the
Transferring Party shall pay, discharge and be responsible for (a) all salary
and wages arising out of or relating to the employment of the employees of its
Stations prior to the Closing Date, (b) all accrued and unpaid vacation pay, (c)
any employee benefits arising under the Benefit Plans of the Transferring Party
and its Affiliates during the period prior to the Closing Date and (d) all
severance Liabilities and all COBRA Liabilities for any Non-Transferred
Employees (subject to
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the Recipient Party's reimbursement obligations set forth in Section 6.9.8).
From and after the Closing Date, the Recipient Party shall pay, discharge and be
responsible for all salary, wages and benefits arising out of or relating to the
employment of the Designated Employees by the Recipient Party on and after the
Closing Date. The Recipient Party shall be responsible for all severance
Liabilities, and all COBRA Liabilities for any Designated Employees terminated
by the Recipient Party on or after the Closing Date.
6.9.3. For purposes of any length of service requirements,
waiting periods, vesting periods or differential benefits based on length of
service pursuant to any employment program provided by the Recipient Party in
any such plan for which a Transferred Employee may be eligible after the
Closing, the Recipient Party shall ensure that, to the extent permitted by law,
service by such Transferred Employee with the applicable Station or any
Affiliate of the Station shall be deemed to have been service with the Recipient
Party.
6.9.4. Each party acknowledges and agrees that its obligations
pursuant to this Section 6.9 are in addition to, and not in limitation of, such
party's obligation to assume the employment contracts of the other party set
forth on Schedule 2.3.9.
6.9.5. Except as otherwise provided in this Section 6.9 or in
any employment, severance or retention agreements of any Designated Employees,
all Designated Employees shall be at-will employees, and the Recipient Party may
terminate their employment or change their terms of employment at will. No
employee (or beneficiary of any employee) of the Stations may sue to enforce the
terms of this Agreement, including specifically this Section 6.9, and no
employee or beneficiary shall be treated as a third party beneficiary of this
Agreement. Except to the extent provided for herein, the Recipient Party may
cover the Designated Employees under existing or new benefit plans, programs,
and arrangements, and may amend or terminate any such plans, programs, or
arrangements at any time.
6.9.6. The Recipient Party agrees to reimburse the
Transferring Party for all severance Liabilities and COBRA Liabilities for
Non-Transferred Employees which are paid by the Transferring Party pursuant to
Section 6.9.2 and which are consistent with the Transferring Party's severance
policy in effect as of the date hereof and disclosed to the Recipient Party.
6.10. DISCLOSURE SCHEDULES.
(a) STC hereby acknowledges that for business reasons HAT has not been
able to deliver a complete set of the Schedules for the HAT Stations referred to
herein prior to the date hereof. HAT covenants that HAT shall deliver to STC
and to STC's counsel a complete set of the Schedules for the HAT Stations (and
copies of all materials identified on the Schedules, as reasonably required to
support such Schedules or as otherwise requested by STC) within ten (10)
business days after the execution and delivery of this Agreement. On the date
of receipt, an officer of HAT shall certify in writing that the Schedules (and
supporting materials) delivered to STC and STC's counsel are complete and
correct. STC shall have ten (10) business days following the date of receipt by
STC and STC's counsel of the complete and correct set of the Schedules (and
supporting materials) for the HAT Stations (the "Schedule Review Period")
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to review such Schedules and to determine in the good faith exercise of STC's
reasonable business judgment whether the items referenced therein are acceptable
to STC. If STC, after reasonable consultation with HAT, determines in the good
faith exercise of STC's reasonable business judgment that the items referred to
in the HAT Schedules are not acceptable, STC shall be entitled to terminate this
Agreement pursuant to the terms set forth in Section 11.2(b).
(b) The parties acknowledge and agree that each party shall have the
right from time to time after the date hereof to update or correct solely
Schedules 2.3.5, 2.3.6, 2.3.8, 2.3.9, 3.4, 4.4, 3.17 and 4.17 attached hereto
solely to reflect actions by such party (and, in the case of STC, actions by
Sinclair or the Heritage Subsidiaries) after the date hereof which are not
prohibited by Section 6.1 hereof. The inclusion of any fact or item on a
Schedule referenced by a particular section in this Agreement shall, should the
existence of the fact or item or its contents, be relevant to any other section,
be deemed to be disclosed with respect to such other section whether or not an
explicit cross-reference appears in the Schedules.
6.11. BULK SALES LAWS.
Each party hereby waives compliance by the other party, in connection
with the transactions contemplated hereby, with the provisions of any applicable
bulk transfer laws.
6.12. TAX MATTERS.
6.12.1. Each party represents, warrants, covenants and agrees
with the other party that for tax purposes the exchange of Assets is not
effective until the Closing Date. The parties agree that all Tax returns and
reports shall be filed consistent with the sale of assets taking place as
aforesaid.
6.12.2. The parties intend that the following exchanges of
Assets pursuant to this Agreement shall qualify as "like kind" exchanges under
Section 1031 of the Code: (a) for the STC Exchange Entities, the exchange by the
STC Exchange Entities of KSBW for the HAT Assets, and (b) for HAT, the exchange
by HAT of the HAT Assets for the STC Assets. The parties acknowledge and agree
that the exchange by the STC Exchange Entities of WNNE and WPTZ is not intended
to qualify for the STC Exchange Entities as a "like kind" exchange under Section
1031 of the Code.
6.12.3. STC covenants with and warrants to HAT, and HAT
covenants with and warrants to STC, that (a) in no Tax return hereafter filed by
STC or any Affiliate of STC, or by HAT or any Affiliate of HAT, or any of their
respective representatives, successors or assigns, will STC or HAT or any of
their respective representatives, successors or assigns, treat any exchanges
described herein inconsistently with or differently than as described herein,
and (b) in no tax audit, tax examination, tax review or tax litigation will STC
or any Affiliate of STC, or HAT or any Affiliate of HAT, or any of their
respective representatives, successors or assigns, treat any such exchange
inconsistently with or differently than as described herein. Each party agrees
to cooperate with the other party in order that STC and HAT effectuate the
tax-deferred
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exchanges as described herein of like-kind property pursuant to Section 1031 of
the Code. The parties agree to execute such agreements and other documents as
may be necessary to complete and otherwise effectuate these tax-deferred
exchanges.
6.12.4. In order to facilitate the Like-Kind Exchange as
contemplated hereunder, STC agrees to take such actions prior to the Closing
(subject to applicable regulatory requirements) as are necessary (the "LKE
Facilitation Transactions") so that immediately prior to the Closing and the
consummation of the Like-Kind Exchange STC Broadcasting shall own all of the STC
Non-License Assets and STC License Company shall own all of the STC License
Assets (the "Preferred STC Ownership"). Notwithstanding anything in this
Agreement to the contrary, the parties acknowledge and agree that STC shall have
the right, without the prior consent of HAT (provided that STC delivers written
notice to HAT of STC's intent to exercise such right at least three (3) days
prior to Closing), to take such actions in order to facilitate the Like-Kind
Exchange in a manner which minimizes the tax consequences to STC of the
transactions contemplated herein provided that the tax consequences for HAT are
the same as if the Preferred STC Ownership structure was used and the
transactions hereunder shall not be adversely affected except that in no event
shall STCBV fail to assign to STCBV Sub all rights under the Sinclair Documents
or STCBV Sub fail to be the entity which acquires WPTZ and WNNE from Sinclair as
contemplated by Section 8.1.
6.12.5. HAT acknowledges and agrees that STC may elect to
facilitate the exchanges contemplated by this Agreement by the use of a
"qualified intermediary" as defined in Treas. Reg. (S)1.1031(k)-1(g)(4) ("QI")
for purposes of engaging in the exchange of the STC License Assets. If STC so
elects, STC shall provide notice to HAT of STC's election, and thereafter both
HAT and STC may at the Closing (but immediately prior to the consummation of the
exchange of Assets contemplated in Article 2) assign such party's rights in
respect of such party's License Assets under this Agreement to a QI (but such
assignment shall not relieve either party of such party's obligations under this
Agreement). Each party shall cooperate with all reasonable requests of the
other party and the QI in arranging and effecting the transfer of the License
Assets to and from the QI. Without limiting the generality of the foregoing, if
STC has given notice of STC's intention to effect the exchange of the Assets
with a QI, (i) HAT shall promptly provide STC with written acknowledgment of
such notice, (ii) at Closing, each party shall deliver such party's License
Assets plus the amount of cash if any, required to complete the exchange to the
QI rather than to the other party (which delivery shall discharge the obligation
of such party to make delivery of the License Assets (and such cash) hereunder),
and (iii) at Closing, accept delivery of the other party's License Assets from
the QI rather than from the other party.
6.13. PRESERVATION OF BOOKS AND RECORDS.
For a period of five (5) years after the Closing Date, each party agrees
not to dispose of, and agrees to provide the other party reasonable access to,
any material books or records in such party's possession immediately after the
Closing Date that relate to the business or operations of its Stations prior to
the Closing Date.
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6.14. AFFILIATED TRANSACTIONS.
If as of the Closing Date a Recipient Party desires to continue any
Affiliated Transactions of a Transferring Party, such Recipient Party shall
provide such Transferring Party written notice at least ten (10) days prior to
the Closing Date designating which Affiliated Transactions shall continue after
the Closing Date; provided, however, the parties acknowledge and agree that no
Affiliated Transactions shall continue for a period in excess of sixty (60) days
after the Closing Date.
6.15. CLEAR CHANNEL AGREEMENTS.
HAT shall not (a) do or omit to do any act which will cause a material
breach under any of the Clear Channel Agreements, or (b) amend, modify,
terminate or agree to amend, modify or terminate any of the Clear Channel
Agreements without the prior written consent of STC.
6.16. SINCLAIR AGREEMENT.
STC shall not (a) do or omit to do any act which will cause a breach
under the Sinclair Agreement, or (b) amend, modify, terminate, grant or consent
to a waiver under, or agree to amend, modify, terminate, grant or consent to a
waiver under, the Sinclair Agreement without the prior written consent of HAT.
6.17. ENVIRONMENTAL REMEDIATION.
The parties acknowledge and agree that certain environmental remediation
is required at WDTN and KSBW and that (a) HAT shall, at its own cost, take
whatever remedial actions are necessary to cause the abandoned underground
storage tanks at WDTN to be in compliance in all material respects with
Environmental Laws, and (b) STC shall, at its own cost, take whatever remedial
actions are necessary to cause the retrofitting at KSBW to be in compliance in
all material respects with Environmental Laws.
6.18 CERTAIN FCC MATTERS
(a) Without the prior written consent of HAT, STC covenants and agrees
that, prior to the Closing, neither STC, SALC nor any Affiliated Entities of STC
or SALC shall acquire any new or increased "attributable interest," as defined
in the FCC rules, in any media property ("Further Media Interest"), which
Further Media Interest could not be held together with the HAT Stations by STC
License Company and SALC as contemplated herein following the Closing Date under
the rules and regulations of the FCC.
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(b) Without the prior written consent of STC, HAT covenants and agrees
that, prior to the Closing, neither HAT nor any Affiliated Entities of HAT shall
acquire any Further Media Interest, which Further Media Interest could not be
held together with the STC Stations by HAT and Affiliated Entities of HAT as
contemplated herein following the Closing Date under the rules and regulations
of the FCC.
ARTICLE 7.
CONDITIONS PRECEDENT TO
OBLIGATIONS OF STC
The obligations of STC under this Agreement to proceed with the Closing
are subject to the satisfaction (or waiver in writing by STC) at or prior to the
Closing of each of the following conditions:
7.1. CLOSING UNDER THE SINCLAIR AGREEMENT.
STCBV Sub shall have acquired WPTZ and WNNE and the related Assets
(including, without limitation, the FCC Licenses) (as such terms are defined in
the Sinclair Agreement) pursuant to the terms of the Sinclair Agreement.
7.2. REPRESENTATIONS AND COVENANTS.
The representations and warranties of HAT made in this Agreement shall
be true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing Date
(except as modified by the Schedules updated after the date hereof in accordance
with Section 6.10 and except for representations and warranties that speak as of
a specific date or time other than the Closing Date, (which need only be true
and correct in all material respects as of such date or time)), and the
covenants and agreements of HAT required to be performed on or before the
Closing Date in accordance with the terms of this Agreement shall have been
performed in all respects, except to the extent that the failure of such
representations and warranties to be true and correct and the failure to perform
such covenants shall not have, when considered together, had a Material Adverse
Effect on the HAT Stations.
7.3. DELIVERY OF DOCUMENTS.
HAT shall have delivered to STC all contracts, agreements, instruments
and documents required to be delivered by HAT to STC pursuant to Section 9.4.
7.4 CONSENTS.
HAT shall have obtained all consents, authorizations or approvals
necessary to effect valid assignments to STC of the main transmission tower and
studio leases for WDTN.
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7.5 ABC AFFILIATION AGREEMENT.
(a) HAT shall have assigned to STC a written network affiliation
agreement with the American Broadcasting Company ("ABC") for WDTN that provides
for (i) Two Million Dollars ($2,000,000) of annual compensation from ABC (ii) a
duration of at least five (5) years after the Closing Date, and (iii) terms and
conditions that are otherwise consistent with the current programming at WDTN
(the "ABC Affiliation Agreement"); provided, however, that HAT shall not be
obligated to assign the ABC Affiliation Agreement if STC provides written notice
to HAT within thirty (30) days of the date of this Agreement that STC shall not
require HAT to obtain the consent of ABC to the assignment of the ABC
Affiliation Agreement to STC as a condition to Closing.
(b) STC and HAT acknowledge and agree that if the ABC Affiliation
Agreement does not provide for Two Million Dollars ($2,000,000) of annual
compensation from ABC, the Cash Consideration payable hereunder by HAT shall be
increased by the amount of (i) Two Million Dollars ($2,000,000) minus the actual
annual compensation received from ABC, multiplied by (ii) Twelve and one-half
(12.5). In addition, if the ABC Affiliation Agreement contains terms and
conditions which are inconsistent with any obligations under any Station
Contracts to be assumed by STC hereunder, the Cash Consideration payable
hereunder by HAT shall also be increased by the amount of Losses to be incurred
by STC as a result of STC's inability to fully use STC's rights under such
Station Contracts.
7.6. FCC ORDER.
The FCC Order shall have been issued with respect to each Station and
shall be in effect.
7.7. HART-SCOTT-RODINO.
All applicable waiting periods under Hart-Scott-Rodino shall have
expired or terminated.
7.8. LEGAL PROCEEDINGS.
No injunction, restraining order or decree of any nature of any court or
Governmental Authority of competent jurisdiction shall be in effect that
restrains or prohibits the transactions contemplated by this Agreement.
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ARTICLE 8.
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF HAT
The obligations of HAT under this Agreement to proceed with the Closing
are subject to the satisfaction (or waiver in writing by HAT) at or prior to the
Closing of each of the following conditions:
8.1. CLOSING UNDER THE SINCLAIR AGREEMENT.
STCBV shall have assigned all of its rights under the Sinclair Documents
to STCBV Sub and STCBV Sub shall have acquired WPTZ and WNNE and the related
Assets (including, without limitation, the FCC Licenses) (as such terms are
defined in the Sinclair Agreement) pursuant to the terms of the Sinclair
Agreement.
8.2. REPRESENTATIONS AND COVENANTS.
The representations and warranties of STC made in this Agreement shall
be true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing Date
(except as modified by the Schedules updated after the date hereof in accordance
with Section 6.10 and except for representations and warranties that speak as of
a specific date or time other than the Closing Date (which need only be true and
correct in all material respects as of such date or time)), and the covenants
and agreements of STC required to be performed on or before the Closing Date in
accordance with the terms of this Agreement shall have been performed in all
respects, except to the extent that the failure of such representations and
warranties to be true and correct and the failure to perform such covenants
shall not have, when considered together, had a Material Adverse Effect on the
STC Stations.
8.3. DELIVERY OF DOCUMENTS.
STC shall have delivered to HAT all contracts, agreements, instruments
and documents required to be delivered by STC to HAT pursuant to Section 9.3.
8.4. CONSENTS.
STC shall have obtained all consents, authorizations or approvals
necessary to effect valid assignments to HAT of the Network Agreement for KSBW.
8.5. FCC ORDER.
The FCC Order shall have been issued with respect to each Station and
shall be in effect.
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8.6. HART-SCOTT-RODINO.
All applicable waiting periods under Hart-Scott-Rodino shall have
expired or terminated.
8.7. LEGAL PROCEEDINGS.
No injunction, restraining order or decree of any nature of any court or
Governmental Authority of competent jurisdiction shall be in effect that
restrains or prohibits the transactions contemplated by this Agreement.
8.8. LKE FACILITATION TRANSACTIONS.
Immediately prior to or at the Closing, STC shall have consummated the
LKE Facilitation Transactions, if necessary.
ARTICLE 9.
CLOSING
9.1. CLOSING.
The closing of the exchange of the Assets hereunder (the "Closing")
shall be held on a date that is the fifth business day after all conditions
precedent to the Closing set forth in Articles 7 and 8 hereof are satisfied or
waived (the "Closing Date").
9.2. TIME AND PLACE OF CLOSING.
The Closing shall be held at 10:00 A.M. local time on the Closing Date
at the offices of Hogan & Hartson L.L.P., 8300 Greensboro Drive, Suite 1100,
McLean, Virginia, or at such other time and place as the parties may agree.
9.3. DELIVERY BY STC AT THE CLOSING.
At or before the Closing, STC shall deliver to HAT the following:
9.3.1. AGREEMENTS AND INSTRUMENTS
The following bills of sale, assignments and other instruments of
transfer with respect to the STC Assets, dated as of the Closing Date and duly
executed by the applicable STC Exchange Entity:
(a) a Bill of Sale;
(b) an Assignment of FCC Licenses;
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(c) an Assignment of Contracts and Leases;
(d) an Assumption Agreement;
(e) certificates of title with respect to motor
vehicles of the STC Exchange Entities listed on
Schedule 2.3.10 or if any such motor vehicles are
leased by any STC Exchange Entity, an assignment
of such lease; and
(f) special or limited warranty deeds for all Real
Property owned by the STC Exchange Entities in the
form appropriate to the jurisdictions in which
such Real Property is located.
9.3.2. CONSENTS.
Copies of all consents STC has been able to obtain to effect the
assignment to HAT of STC's Station Contracts listed on Schedule 3.4.
9.3.3. CERTIFIED RESOLUTIONS.
A copy of the approval of the board of directors of each STC Party,
certified as being correct and complete and then in full force and effect,
authorizing the execution, delivery and performance of this Agreement, and of
the other agreements to which such STC Party is a party, and the consummation
of the transactions contemplated hereby and thereby.
9.3.4. OFFICERS' CERTIFICATES.
(a) A certificate of each STC Party certifying the
matters set forth in Section 8.2;
(b) A certificate of each STC Party as to the
incumbency of the representatives of such STC Party executing this Agreement or
any of the other agreements to which such STC Party is a party; and
(c) A certificate of STC Broadcasting certifying that
all amounts due and payable as of the Closing Date under any of STC's Station
Contracts relating to KSBW have been paid in full.
9.3.5. GOOD STANDING CERTIFICATES.
To the extent available from the applicable jurisdictions, certificates
as to the formation and/or good standing of each STC Party issued by the
appropriate governmental authorities in the states of organization and each
jurisdiction in which such STC Party is qualified to do business, each such
certificate (if available) to be dated a date not more than a reasonable number
of days prior to the Closing Date.
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9.4. DELIVERY BY HAT AT THE CLOSING.
At or before the Closing, HAT shall deliver to STC the following:
9.4.1. AGREEMENTS AND INSTRUMENTS
The following bills of sale, assignments and other instruments of
transfer with respect to the HAT Assets, dated as of the Closing Date and duly
executed by HAT:
(a) a Bill of Sale;
(b) an Assignment of FCC Licenses;
(c) an Assignment of Contracts and Leases;
(d) an Assumption Agreement;
(e) certificates of title with respect to motor vehicles of
HAT listed on Schedule 2.3.10 or if any such motor
vehicles are leased by HAT, an assignment of such lease;
and
(f) special or limited warranty deeds for all Real Property
owned by HAT in the form appropriate to the jurisdictions
in which such Real Property is located.
9.4.2. CONSENTS.
(a) Copies of all consents HAT has been able to obtain
to effect the assignment to STC of HAT's Station Contracts listed on Schedule
4.4.
(b) Copies of all consents or notices required under
the Clear Channel Agreements as are required to comply with the terms thereof
and to validly assign the Clear Channel Agreements to STC.
9.4.3. CERTIFIED RESOLUTIONS.
A copy of the approval of the board of directors of HAT, certified as
being correct and complete and then in full force and effect, authorizing the
execution, delivery and performance of this Agreement, and of the other
agreements to which HAT is a party, and the consummation of the transactions
contemplated hereby and thereby.
9.4.4. OFFICERS' CERTIFICATES.
(a) A certificate of HAT certifying the matters set
forth in Section 7.2;
(b) A certificate of HAT as to the incumbency of the
representatives of HAT executing this Agreement or any of the other agreements
to which HAT is a party; and
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(c) A certificate of HAT certifying that all amounts
due and payable as of the Closing Date under any of HAT's Stations Contracts
relating to WDTN have been paid in full.
9.4.5. GOOD STANDING CERTIFICATES.
To the extent available from the applicable jurisdictions, certificates
as to the formation and/or good standing of HAT issued by the appropriate
governmental authorities in the states of organization and each jurisdiction in
which HAT is qualified to do business, each such certificate (if available) to
be dated a date not more than a reasonable number of days prior to the Closing
Date.
ARTICLE 10.
SURVIVAL; INDEMNIFICATION
10.1. SURVIVAL OF REPRESENTATIONS.
10.1.1. Unless otherwise set forth herein (including, without
limitation, Section 10.1.2), all representations and warranties, covenants and
agreements of the parties hereto contained in or made pursuant to this Agreement
or in any certificate furnished pursuant hereto shall survive the Closing Date
and shall remain in full force and effect to the following extent: (a)
representations and warranties shall survive for a period of twelve (12) months
after the Closing Date, (b) the covenants and agreements which by their terms
survive the Closing shall continue in full force and effect until fully
discharged (but not beyond the expiration of twelve (12) months after the
Closing Date except in the case of the indemnities set forth in clauses (a),
(b), (d) and (g) of Section 10.2, clauses (a), (b), (d) and (g) of Section 10.3
and Section 10.6 which shall survive indefinitely), and (c) any representation,
warranty, covenant or agreement that is the subject of a claim which is asserted
in a reasonably detailed writing prior to the expiration of the survival period
set forth in this Section 10.1.1, shall survive with respect to such claim or
dispute until the final resolution thereof.
10.1.2. No claim for indemnification may be made pursuant to
this Article 10 after the survival period set forth in this Section 10.1.
10.2. INDEMNIFICATION BY STC.
Subject to the conditions and provisions of Section 10.4 and Section
10.5, from and after the Closing Date, STC agrees to indemnify, defend and hold
harmless HAT from and against and in any respect of, on a net after-tax basis,
any and all Losses, asserted against, resulting to, imposed upon or incurred by
HAT, directly or indirectly, by reason of or resulting from: (a) any failure by
STC to pay, perform or discharge any Liabilities not assumed by HAT pursuant
hereto; (b) the business or operations of KSBW during the period prior to the
Closing Date; (c) any misrepresentation or breach of the representations and
warranties of STC contained in or made pursuant to this Agreement or any STC
Document (it being agreed that for this
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purpose the representations and warranties made in the certificates delivered
pursuant to Section 9.3.4(a) shall not be qualified by references to Material
Adverse Effect set forth in Section 8.2); (d) any breach by STC of any covenants
of STC contained in or made pursuant to this Agreement or any other STC Document
except for covenants relating to WPTZ and WNNE (which are addressed in Section
10.2(h)); (e) the failure of STC to comply with the provisions of any applicable
bulk transfer law; (f) any breach of the covenants and agreements of STC
contained in Section 6.18; (g) any WFFF Liabilities; or (h) any Sinclair
Liabilities arising as a result of the willful misconduct, gross negligence or
bad faith of STC.
10.3. INDEMNIFICATION BY HAT.
Subject to the conditions and provisions of Section 10.4 and Section
10.5, from and after the Closing Date, HAT agrees to indemnify, defend and hold
harmless STC from and against and in any respect of, on a net after-tax basis,
any and all Losses, asserted against, resulting to, imposed upon or incurred by
STC, directly or indirectly, by reason of or resulting from: (a) any failure by
HAT to pay, perform or discharge any Liabilities not assumed by STC pursuant
hereto; (b) the business or operations of the HAT Stations during the period
prior to the Closing Date (except to the extent STC has assumed the Liability
for any such Losses pursuant hereto); (c) any misrepresentation or breach of the
representations and warranties of HAT contained in or made pursuant to this
Agreement or any HAT Document (it being agreed that for this purpose the
representations and warranties made in the certificates delivered pursuant to
Section 9.4.4(a) shall not be qualified by references to Material Adverse Effect
set forth in Section 7.2); (d) any breach by HAT of any covenants of HAT
contained in or made pursuant to this Agreement or any other HAT Document; (e)
the failure of HAT to comply with the provisions of any applicable bulk transfer
law; (f) any breach of the covenants and agreements of HAT contained in Section
6.18; or (g) any Sinclair Liabilities (but excluding any such Sinclair
Liabilities arising as a result of the willful misconduct, gross negligence or
bad faith of STC).
10.4. LIMITATIONS ON INDEMNIFICATION.
10.4.1. Notwithstanding any other provision of this Agreement
to the contrary, in no event shall Losses include a party's incidental,
consequential or punitive damages, regardless of the theory of recovery. Each
party hereto agrees to use reasonable efforts to mitigate any Losses which form
the basis for any claim for indemnification hereunder.
10.4.2. Notwithstanding any other provision of this Agreement
to the contrary, neither party shall be liable to the other party in respect of
any indemnification hereunder except to the extent that the aggregate amount of
Losses of the other party under this Agreement exceeds Five Hundred Thousand
Dollars ($500,000) (the "Basket Amount"), in which event the Indemnified Party
shall be entitled to seek indemnity from each Indemnifying Party for the full
amount of such Losses; provided, however, the Basket Amount shall not be
applicable to any amounts owed in connection with the determination of the
Proration Amount pursuant to Section 2.6, to the determination of the Accounts
Receivable amount pursuant to Section 2.7, risk of loss matters pursuant to
Section 6.6, the obligations with respect to employee
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matters pursuant to Section 6.8 and Section 6.9 or to the indemnities set forth
in clauses (a), (b), (e), (f), (g) and (h) of Section 10.2 and clauses (a), (b),
(e), (f) and (g) of Section 10.3.
10.4.3. Each party (a "recipient party") shall notify the
other party in writing (the "representing party") reasonably promptly of any
perceived breach by the representing party of which the recipient party has
knowledge of any representations, warranties, covenants and agreements, and of
any Losses (including a brief description of the same) of the recipient party
caused thereby. In the event of any breach that is cured prior to the Closing
Date in accordance with the terms of this Agreement, the representing party
shall have no obligation under Section 10.2 or Section 10.3 or otherwise to
indemnify the recipient party with respect to such Losses.
10.5. CONDITIONS OF INDEMNIFICATION.
The obligations and liabilities of the parties hereunder with respect to
their respective indemnities pursuant to this Article 10, resulting from any
Losses, shall be subject to the following terms and conditions:
10.5.1. The party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Losses promptly after the Indemnified
Party receives notice thereof; provided that the failure to give such notice
shall not affect the rights of the Indemnified Party hereunder except to the
extent that the Indemnifying Party shall have suffered actual damage by reason
of such failure.
10.5.2. The Indemnifying Party shall have the right to
undertake, by counsel or other representatives of its own choosing, the defense
of such Losses at the Indemnifying Party's risk and expense.
10.5.3. In the event that the Indemnifying Party shall elect
not to undertake such defense, or, within a reasonable time after notice from
the Indemnified Party of any such Losses, shall fail to defend, the Indemnified
Party (upon further written notice to the Indemnifying Party) shall have the
right to undertake the defense, compromise or settlement of such Losses, by
counsel or other representatives of its own choosing, on behalf of and for the
account and risk of the Indemnifying Party (subject to the right of the
Indemnifying Party to assume defense of such Losses at any time prior to
settlement, compromise or final determination thereof). In such event, the
Indemnifying Party shall pay to the Indemnified Party, in addition to the other
sums required to be paid hereunder, the costs and expenses incurred by the
Indemnified Party in connection with such defense, compromise or settlement as
and when such costs and expenses are so incurred.
10.5.4. Anything in this Section 10.5 to the contrary
notwithstanding, (a) if there is a reasonable possibility that Losses may
materially and adversely affect the Indemnified Party other than as a result of
money damages or other money payments, the Indemnified Party shall have the
right, at its own cost and expense, to participate in the defense, compromise or
settlement of the Losses, (b) the Indemnifying Party shall not, without the
Indemnified Party's
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written consent, settle or compromise any Losses or consent to entry of any
judgment which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such Losses in form and substance satisfactory to the
Indemnified Party, and (c) in the event that the Indemnifying Party undertakes
defense of any Losses, the Indemnified Party, by counsel or other representative
of its own choosing and at its sole cost and expense, shall have the right to
consult with the Indemnifying Party and its counsel or other representatives
concerning such Losses and the Indemnifying Party and the Indemnified Party and
their respective counsel or other representatives shall cooperate with respect
to such Losses and (d) in the event that the Indemnifying Party undertakes
defense of any Losses, the Indemnifying Party shall have an obligation to keep
the Indemnified Party informed of the status of the defense of such Losses and
furnish the Indemnified Party with all documents, instruments and information
that the Indemnified Party shall reasonably request in connection therewith.
10.6. SPECIAL TAX INDEMNIFICATION BY HAT.
(a) The parties acknowledge and agree that STC does not intend to
acquire WPTZ and WNNE for productive use in a trade or business or for
investment within the meaning of Section 1031 of the Code ("Productive
Use/Investment Property") and the parties do not intend for WPTZ and WNNE to be
treated as property exchanged by STC under this Agreement for property of a
like-kind. STC covenants and agrees not to take any position on any income tax
return that is in any way inconsistent with the foregoing.
(b) HAT agrees to indemnify, defend and hold harmless (the "Tax
Indemnity") STC and each member of STC's federal consolidated group
(collectively, the "STC Indemnified Party") from and against, and in any respect
of, any and all Losses or any net increase in any Taxes (collectively, the "Tax
Increase") to the STC Indemnified Party that is asserted against, resulting to,
imposed upon or incurred by any STC Indemnified Party in connection with any
assertion by the Internal Revenue Service that the exchange of WPTZ and WNNE
pursuant to this Agreement constitutes Productive Use/Investment Property. The
Tax Increase shall be computed by (i) determining the amount obtained by
multiplying (A) the projected increases and decreases in federal, state and
local income or gains of the STC Indemnified Parties for 1998 and each later
taxable year on account of the increases and decreases in income or gains each
year resulting from treatment of WPTZ and WNNE as Productive Use/Investment
Property, by (B) the highest marginal federal, state and local tax rates
applicable to a corporation under applicable law as of the Closing, and (ii)
discounting the net increases or decreases in potential Taxes described in
clause (i) to the date of Closing using a discount rate of 7% per year. The
amount of any Tax Indemnity payment by HAT to an STC Indemnified Party pursuant
to this Section 10.6(b) shall be further increased by an amount (the "Gross-Up
Payment") such that after payment by any STC Indemnified Party of any such
Taxes, including any Taxes imposed on the Gross-Up Payment, STC shall receive
from HAT an amount as if no Taxes had been payable. For purposes of computing
any Taxes relevant to this Section 10.6, any STC Indemnified Party shall be
assumed to be a corporation that is fully taxable on all of its income or gains
at the highest applicable marginal rates for the Taxes at issue as of the
Closing.
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(c) Each STC Indemnified Party agrees that in the event it receives
notice, whether oral or written, of any federal, state or local examination,
audit, proposed adjustment, or other administrative or court proceeding, suit,
dispute or other claim (a "Tax Claim") that may affect HAT's liability under
this Section 10.6, the STC Indemnified Party shall promptly notify HAT; provided
that the failure to give such notice shall not affect the rights of the STC
Indemnified Party hereunder except to the extent that HAT shall have suffered
actual damage by reason of such failure. HAT shall be entitled at its sole
discretion and expense to handle and control the defense of any Tax Claim, and
the STC Indemnified Party shall cooperate with HAT in this regard by giving HAT
and its representatives the opportunity to negotiate, settle or dispute the Tax
Claim together with reasonable assistance including, without limitation,
reasonable access to all relevant information, books and records. In no event
may the STC Indemnified Party compromise or settle any Tax Claim without first
obtaining the written consent of HAT.
10.7. CURE OF BREACH.
Notwithstanding any other provision of this Agreement to the contrary, a
breach by any party hereto of any representations and warranties or a failure to
perform any covenant or agreement hereunder may be cured by such party prior to
the Closing Date (a) by making payment to a third party or taking other action
to discharge the Losses, (b) by placing an amount equal to the Losses in an
escrow account under an escrow arrangement reasonably satisfactory to STC and
HAT or (c) a combination of the foregoing. If the foregoing actions fully cure
the breach, the breaching party shall have no obligation under this Article 10
or otherwise to indemnify the other party with respect to the Losses caused by
such breach; if such actions partially cure the breach, the breaching party
shall continue to have an obligation under this Article 10 to indemnify the
other party with respect to the remaining portion of the Losses caused by such
breach.
ARTICLE 11.
TERMINATION
11.1. TERMINATION OF EXCHANGE BY THE PARTIES.
11.1.1. The obligation of the parties to consummate the
closing of the exchange of the Assets contemplated by Article 2 may be
terminated at any time prior to such closing by:
(a) the mutual consent of STC and HAT;
(b) STC if HAT shall default in the performance of its
obligations under this Agreement in any material respect and such default is not
cured within thirty (30) days after notice thereof, and provided that STC shall
not then be in material default in the performance of STC's obligations
hereunder;
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(c) HAT if any STC Party shall default in the
performance of its obligations under this Agreement in any material respect and
such default is not cured within thirty (30) days after notice thereof, and
provided that HAT shall not then be in material default in the performance of
HAT's obligations hereunder; and
(d) either HAT or STC if such closing shall not have
occurred on or prior to such date which is two (2) years after the date of this
Agreement (provided that the party seeking to terminate shall not have such
termination right if such party is in breach of this Agreement and such breach
caused such closing to fail to occur).
11.1.2. Anything contained in this Agreement to the contrary
notwithstanding, in the event that (a) the obligation of the parties to
consummate the closing of the exchange of the Assets contemplated by Article 2
shall be terminated pursuant to Section 11.1, and (b) HAT shall have provided
all required portions of the Burlington Financing Amount to STCBV Sub in
connection with the acquisition of any assets by STC under the Sinclair
Agreement, then in lieu of such exchange of Assets transaction (x) the LKE
Facilitation Transactions shall not be consummated and (y) STCBV Sub shall sell,
assign, transfer, convey and deliver to HAT, free and clear of any Encumbrances
other than those Permitted Encumbrances which are applicable to WPTZ and WNNE,
and HAT shall purchase, acquire and accept from STCBV Sub, all right, title and
interest of STCBV Sub in, to and under all real, personal and mixed assets,
rights, benefits and privileges, both tangible and intangible, owned, leased,
used or useful by STCBV Sub in connection with the business and operations of
WPTZ and WNNE (collectively, the "Cash Purchase Assets"), in each case on the
identical terms and conditions as would have otherwise applied if the closing of
the exchange of the Assets contemplated by Article 2 had occurred except as
follows:
(i) All provisions of this Agreement, including but not
limited to those provisions contained in Article 2, which relate to the HAT
Stations shall be disregarded insofar as such provisions relate to the HAT
Stations;
(ii) All provisions of this Agreement, including but
not limited to those provisions contained in Article 2, which relate to KSBW
shall be disregarded insofar as such provisions relate to KSBW;
(iii) In lieu of the closing of the exchange of the
Assets contemplated by Article 2, the term "Closing" will be deemed to refer to
the closing of the purchase and sale of the Cash Purchase Assets described in
this Section 11.1;
(iv) In lieu of the provisions of Section 2.5, the
following shall apply: For and in consideration of the conveyance of Cash
Purchase Assets to HAT and in addition to the assumption of Liabilities by HAT
as set forth in Section 2.10, at the Closing HAT agrees to pay to STCBV Sub an
amount equal to that portion of the Purchase Price (as defined in the Sinclair
Agreement) which shall theretofore have been paid by STC pursuant to the
Sinclair Agreement (but excluding any proration amounts), either by wire
transfer of immediately
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available funds to an account designated by STC or by set off against any
outstanding Burlington Financing Amount;
(v) In lieu of Section 2.8, the following shall apply:
The payment made by HAT to STCBV Sub pursuant to subparagraph (iv) above shall
be allocated among the Cash Purchase Assets in accordance with the Appraisal,
unless the parties otherwise agree, and all Tax returns and reports shall be
filed consistent with such allocation;
(vi) At the Closing, in lieu of the applicable STC
Exchange Entity, STCBV Sub will deliver the bills of sale, assignments and other
instruments of transfer described in Section 9.3.1 with respect to the Cash
Purchase Assets; and
(vii) The following Sections of this Agreement shall be
deemed to be void and shall have no further force and effect: 2.5, 2.7, 2.8,
6.12 and 10.6.
11.2. TERMINATION OF AGREEMENT.
This Agreement shall automatically terminate without further action by
the parties upon the termination of the Sinclair Agreement in accordance with
its terms. This Agreement may also be terminated by:
(a) HAT by written notice of termination delivered to STC at any time
prior to July 26, 1998 if the acquisition by Sinclair of the Burlington Stations
under the Heritage Agreement shall not have occurred on or prior to July 16,
1998;
(b) STC by written notice of termination delivered to HAT if (i) HAT
shall not have delivered a complete set of the Schedules for the HAT Stations
(and supporting materials) within ten (10) business days after the execution and
delivery of this Agreement, or (ii) at any time prior to the end of the Schedule
Review Period pursuant to Section 6.10(a); and
(c) STC by written notice of termination delivered to HAT at any time
prior to the closing of the exchange of the Assets contemplated by Article 2 if
(i) HAT shall have defaulted in its obligation to provide the initial funding of
the Burlington Financing Amount as required under Section 2.13, or (ii) if prior
to the funding of any portion of the Burlington Financing Amount, there shall
have been a default by HAT in the performance of its obligations under this
Agreement in any material respect and such default is not cured within thirty
(30) days after notice thereof, and provided that STC shall not then be in
material default in the performance of STC's obligations hereunder.
11.3. EFFECT OF TERMINATION.
11.3.1. In the event this Agreement is terminated as provided
in Section 11.2, this Agreement shall be deemed null, void and of no further
force or effect, and the parties hereto shall be released from all future
obligations hereunder; provided, however, that the obligations of the parties
set forth in Section 2.14 (which relate to reimbursement by STCBV
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Sub of any Working Capital Advances), Section 6.3, and Section 12.3, shall
survive such termination and the parties hereto shall have any and all remedies
to enforce such obligations provided at law or in equity or otherwise
(including, without limitation, specific performance); and provided, further
that such termination shall not affect the liability of any party hereto with
respect to any breach of this Agreement by such party occurring prior to such
termination.
11.3.2. In the event that the Sinclair Agreement is terminated
as provided therein and Sinclair is entitled to the Deposit under the Letter of
Credit (each as defined in the Sinclair Agreement), HAT shall reimburse STC for
the amount of the Deposit; provided, however, there shall not have been a
material breach or default by STC under the Sinclair Agreement.
ARTICLE 12.
GENERAL PROVISIONS
12.1. ADDITIONAL ACTIONS, DOCUMENTS AND INFORMATION.
The Transferring Party agrees that it will, at any time, prior to, at or
after the Closing Date, take or cause to be taken such further actions, and
execute, deliver and file or cause to be executed, delivered and filed such
further documents and instruments and obtain such consents, as may be reasonably
requested by the Recipient Party in connection with the consummation of the
exchange contemplated by this Agreement.
12.2. BROKERS.
Except for the fees payable as set forth in Schedule 12.2, STC
represents to HAT that STC has not engaged, or incurred any unpaid liability
(for any brokerage fees, finders' fees, commissions or otherwise) to, any
broker, finder or agent in connection with the transactions contemplated by this
Agreement; except for the fees payable as set forth in Schedule 12.2, HAT
represents to STC that HAT has not engaged, or incurred any unpaid liability
(for any brokerage fees, finders' fees, commissions or otherwise) to, any
broker, finder or agent in connection with the transactions contemplated by this
Agreement; and STC agrees to indemnify HAT, and HAT agrees to indemnify STC,
against any claims asserted against the other party for any such fees or
commissions by any person purporting to act or to have acted for or on behalf of
the indemnifying party. Notwithstanding any other provision of this Agreement,
this representation and warranty shall survive the Closing without limitation
and shall not be subject to the Basket Amount contained in Section 10.4.2.
12.3. EXPENSES AND TAXES.
(a) Unless otherwise provided herein, each party hereto shall pay its
own expenses incurred in connection with this Agreement and in the preparation
for and consummation of the transactions provided for herein, including, without
limitation, all costs
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and expenses incurred in connection with any title insurance policies, surveys
or environmental assessments (including the environmental remediation described
in Section 6.16) obtained by such party (and in the case of STC, all expenses
incurred by STC in connection with STC's financing required to consummate the
transactions contemplated herein). Notwithstanding the foregoing, HAT and STC
shall each pay one-half of (i) all sales (including, without limitation, bulk
sales), use, documentary, stamp, gross receipts, registration, transfer,
conveyance, excise, recording, license and other similar Taxes and fees
("Transfer Taxes") applicable to, imposed upon or arising out of the conveyances
of the Assets whether now in effect or hereinafter adopted and regardless of
which party such Transfer Tax is imposed upon, (ii) any FCC filing fees incurred
in connection with the assignment of the FCC Licenses, and (iii) any fees and
expenses incurred in connection with any HSR Filings, and (iv) any fees and
expenses incurred in connection with the use of a QI as contemplated by Section
6.12.
(b) HAT acknowledges and agrees that STC is acquiring WPTZ and WNNE
for HAT's benefit, and HAT agrees to reimburse STC for all costs and expenses
incurred by STC under the Sinclair Documents, including, without limitation, (i)
the costs of the letter of credit deposited by STC pursuant to the Sinclair
Agreement (provided that there shall not have been a material breach or default
by STC under the Sinclair Agreement which results in the forfeiture of the
letter of credit to Sinclair), and (ii) STC's share of costs and expenses
required to be paid by STC pursuant to Section 15.3 of the Sinclair Agreement;
provided, however, all expenses of counsel and accountants of any STC Party in
connection with the negotiation and documentation of the Sinclair Documents and
the consummation of the transactions contemplated therein and all expenses of
STC in connection with STC's financing required to repay the Burlington
Financing Amount (net of the Cash Consideration) shall be paid by STC.
(c) Subject to HAT's obligations to reimburse STC for all costs and
expenses incurred by STC under the Sinclair Documents pursuant to Section
12.3(b), from and after the Closing, STC agrees to remit to HAT any monies
received from Sinclair or held for the benefit of STC under the Sinclair
Agreement that relate to WPTZ and WNNE.
12.4. NOTICES.
All notices, demands, requests, or other communications which may be or
are required to be given or made by any party to any other party pursuant to
this Agreement shall be in writing and shall be hand delivered, mailed by
first-class registered or certified mail, return receipt requested, postage
prepaid, delivered by overnight air courier, or transmitted by telegram, telex,
or facsimile transmission addressed as follows:
If to STC:
STC Broadcasting, Inc.
3839 4th Street North
Suite 420
St. Petersburg, Florida 33703
-66-
<PAGE> 76
Attn: David Fitz
Fax: (813) 821-8092
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn: William S. Reyner, Jr., Esq.
Fax: (202) 637-5910
and to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr.
Fax: (214) 740-7355
If to HAT:
Hearst-Argyle Television, Inc.
959 Eighth Avenue
New York, New York 10019
Attn: Dean H. Blythe
Fax: (212) 489-2314
with a copy (which shall not constitute notice) to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attn: Steven A. Hobbs
Fax: (212) 878-8375
or such other address as the addressee may indicate by written notice to the
other parties.
Each notice, demand, request, or communication which shall be given or
made in the manner described above shall be deemed sufficiently given or made
for all purposes at such time as it is delivered to the addressee (with the
return receipt, the delivery receipt, the affidavit of messenger or (with
respect to a telex) the answerback being deemed conclusive but not exclusive
evidence of such delivery) or at such time as delivery is refused by the
addressee upon presentation.
-67-
<PAGE> 77
12.5. WAIVER.
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Agreement or under any other instrument or
document given in connection with or pursuant to this Agreement shall impair any
such right, power or privilege or be construed as a waiver of any default or any
acquiescence therein. No single or partial exercise of any such right, power or
privilege shall preclude the further exercise of such right, power or privilege,
or the exercise of any other right, power or privilege. No waiver shall be
valid against any party hereto unless made in writing and signed by the party
against whom enforcement of such waiver is sought and then only to the extent
expressly specified therein.
12.6. BENEFIT AND ASSIGNMENT.
12.6.1. Neither party shall assign this Agreement, in whole or
in part, whether by operation of law or otherwise, without the prior written
consent of the other party and any purported assignment contrary to the terms
hereof shall be null, void and of no force and effect; provided, however, each
party consents to the assignment of this Agreement to a QI as contemplated by
Section 6.12.
12.6.2. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto (and any STC Indemnified Party) and their
respective successors and assigns as permitted hereunder. No Person, other than
the parties hereto (and any STC Indemnified Party) and their respective
successors and assigns as permitted hereunder, is or shall be entitled to bring
any action to enforce any provision of this Agreement against any of the parties
hereto, and the covenants and agreements set forth in this Agreement shall be
solely for the benefit of, and shall be enforceable only by, the parties hereto
(and any STC Indemnified Party) or their respective successors and assigns as
permitted hereunder.
12.7. ENTIRE AGREEMENT; AMENDMENT.
This Agreement, including the Schedules and Exhibits hereto and the
other instruments and documents referred to herein or delivered pursuant hereto,
contains the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior oral or written agreements, commitments
or understandings with respect to such matters. No amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth in
writing and duly executed by each of the parties hereto.
12.8. SEVERABILITY.
If any part of any provision of this Agreement or any other contract,
agreement, document or writing given pursuant to or in connection with this
Agreement shall be invalid or unenforceable under applicable law, such part
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provisions or the
remaining provisions of said contract, agreement, document or writing.
-68-
<PAGE> 78
12.9. HEADINGS.
The headings of the sections and subsections contained in this Agreement
are inserted for convenience only and do not form a part or affect the meaning,
construction or scope thereof.
12.10. GOVERNING LAW.
This Agreement, the rights and obligations of the parties hereto, and
any claims or disputes relating thereto, shall be governed by and construed
under and in accordance with the laws of the State of New York, excluding the
choice of law rules thereof.
12.11. SIGNATURE IN COUNTERPARTS.
This Agreement may be executed in separate counterparts, none of which
need contain the signatures of all parties, each of which shall be deemed to be
an original, and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
-69-
<PAGE> 79
IN WITNESS WHEREOF, each of the parties hereto has executed this Asset
Exchange Agreement, or has caused this Asset Exchange Agreement to be duly
executed and delivered in its name on its behalf, all as of the day and year
first above written.
STC BROADCASTING, INC.
By: /s/ David A. Fitz
-------------------------------
David A. Fitz
Chief Financial Officer
STC LICENSE COMPANY
By: /s/ David A. Fitz
-------------------------------
David A. Fitz
Chief Financial Officer
STC BROADCASTING OF VERMONT, INC.
By: /s/ David A. Fitz
-------------------------------
David A. Fitz
Chief Financial Officer
STC BROADCASTING OF VERMONT
SUBSIDIARY, INC.
By: /s/ David A. Fitz
-------------------------------
David A. Fitz
Chief Financial Officer
<PAGE> 80
HEARST-ARGYLE STATIONS, INC.
By: /s/ Dean H. Blythe
------------------------------
Dean H. Blythe
Senior Vice President
<PAGE> 81
ANNEX I
DEFINITIONS
"ABC" shall have the meaning specified in Section 7.5.
"ABC AFFILIATION AGREEMENT" shall have the meaning set forth in Section
7.5.
"ACCOUNTING FIRM" shall have the meaning set forth in Section 2.6.2.
"ACCOUNTS RECEIVABLE" means all cash accounts receivable with respect
to a Station as of the end of the broadcast day immediately preceding the
Closing Date.
"ADDITIONAL AGREEMENTS" shall have the meaning set forth in Section
6.1.6.
"AFFILIATE" shall mean, with respect to any Person, any other Person
that, (a) directly or indirectly is in control of, is controlled by, or is
under common control with, the first Person, (b) is an officer, director,
trustee, partner (general or limited), employee or holder of five percent (5%)
or more of any class of any voting or non-voting securities or other equity in
the first Person, (c) is an officer, director, trustee, partner (general or
limited), employee or holder of five percent (5%) or more of any class of the
voting or non-voting securities or other equrity in any Person which directly or
indirectly is in control of, is controlled by, or is under common control with,
the first Person, and (d) any Family of any individual included in (a), (b) or
(c). For purposes of this definition, "control" (including with correlative
meanings "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of either (X) five percent (5%) or more of
the voting power of the securities having ordinary voting power for the
election of directors of the first Person, or (Y) the power to direct or cause
the direction of the management or policies of the first Person (whether
through ownership of securities, partnership interests or any other ownership
or debt interests, by contract or otherwise).
"AFFILIATED ENTITIES" shall mean, with respect to any Person, any other
Person that directly or indirectly is in control of, is controlled by, or is
under common control with, the first Person.
"AFFILIATED TRANSACTIONS" shall have the meaning set forth in Section
4.19.
"AGREEMENT" shall have the meaning set forth in the Preamble.
"APPLICANT" shall have the meaning set forth in Section 3.9.3.
"APPRAISAL" shall have the meaning set forth in Section 2.8.1.
"APPRAISAL FIRM" shall have the meaning set forth in Section 2.8.1.
"APPRAISAL REPORT" shall have the meaning set forth in Section 2.8.1.
<PAGE> 82
"ASSETS" shall have the meaning set forth in Section 2.2.
"ASSIGNMENT OF CONTRACTS AND LEASES" means that certain Assignment of
Contracts and Leases, dated as of the Closing Date and executed by the
Transferring Party, substantially in the form attached hereto as Exhibit C.
"ASSIGNMENT OF FCC LICENSES" means that certain Assignment of FCC
Licenses, dated as of the Closing Date and executed by the Transferring Party,
substantially in the form attached hereto as Exhibit B.
"ASSUMED LIABILITIES" mean the Liabilities assumed by the Recipient
Party pursuant to Section 2.9 or Section 2.10, as the case may be.
"ASSUMPTION AGREEMENT" means that certain Assumption Agreement, dated
the Closing Date and executed by the parties, substantially in the form
attached hereto as Exhibit D.
"BASKET AMOUNT" shall have the meaning set forth in Section 10.4.2.
"BENEFIT ARRANGEMENT" means any benefit arrangement, obligation, custom,
or practice, whether or not legally enforceable, to provide benefits, other
than salary, as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors, other than any
obligation, arrangement, custom or practice that is a Plan, including, without
limitation, employment agreements, executive compensation arrangements,
incentive programs or arrangements, sick leave, vacation pay, plant closing
benefits, salary continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock option or purchase, hospitalization, medical insurance, life insurance,
tuition reimbursement or scholarship programs, perquisite, company cars, any
plans subject to Code Section 125, and any plans providing benefits or payments
in the event of a change of control, change in ownership, or sale of a
substantial portion (including all or substantially all) of the assets of any
business or portion thereof, in each case with respect to any present or former
employees, directors, or agents.
"BENEFIT LIABILITIES" shall have the meaning set forth in Section
3.14.6.
"BENEFIT PLANS" shall have the meaning set forth in Section 4.14.1.
"BILL OF SALE" means that certain Bill of Sale and Assignment of
Assets, dated as of the Closing Date and executed by the Transferring Party,
substantially in the form attached hereto as Exhibit A.
"BURLINGTON FINANCING AMOUNT" shall have the meaning set forth in
Section 2.13.
"BURLINGTON STATIONS" shall have the meaning set forth in the Recitals.
"CASH CONSIDERATION" shall have the meaning set forth in Section 2.5.1.
ANNEX I-2
<PAGE> 83
"CASH PURCHASE ASSETS" shall have the meaning set forth in Section
11.1.2.
"CLEAR CHANNEL" shall have the meaning set forth in the Recitals.
"CLEAR CHANNEL AGREEMENTS" shall have the meaning set forth in the
Recitals.
"CLOSING" shall have the meaning set forth in Section 9.1.
"CLOSING DATE" shall have the meaning set forth in Section 9.1.
"CODE" means the Internal Revenue Code of 1986, as amended, and all
Laws promulgated pursuant thereto or in connection therewith.
"CURRENT BALANCE SHEET DATE" shall have the meaning set forth in
Section 3.5.2.
"DEFERRED CONTRACT" shall have the meaning set forth in Section
6.2.10(b).
"DESIGNATED EMPLOYEES" shall have the meaning set forth in Section
6.9.1.
"DMA" means the designated market area for a particular television or
radio station as determined by the A.C. Nielsen Co.
"ENCUMBRANCES" mean any mortgages, pledges, liens, security interests,
defects in title, easements, rights-of-way, encumbrances, restrictions and any
other matters affecting title.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, ("CERCLA") as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section 9601 et
seq.; the Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq.;
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1802 et seq.; the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 9601 et seq.;
the Clean Water Act ("CWA"), 33 U.S.C. Section 1251 et seq.; the Safe Drinking
Water Act, 42 U.S.C. Section 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C.
Section 7401 et seq.; or any other applicable federal, state, or local laws
relating to Hazardous Materials generation, production, use, storage, treatment,
transportation or disposal, or the protection of the environment from Hazardous
Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all Laws promulgated pursuant thereto or in connection therewith.
"ERISA AFFILIATE" means any person that, together with the referenced
party, would be or was prior to March 17, 1997 treated as a single employer
under Section 414 of the Code or Section 4001 of ERISA.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 2.4.
ANNEX I-3
<PAGE> 84
"FAMILY" of an individual includes (a) the individual, (b) the
individual's spouse and former spouses and any other natural person who resides
with such individual, and (c) any other natural person who is related to the
individual or any person described in the preceding clause (b) within the
second degree.
"FCC" means the Federal Communications Commission.
"FCC APPLICATIONS" shall have the meaning set forth in Section 5.1.
"FCC LICENSES" shall have the meaning set forth in Section 2.3.1.
"FCC ORDER" means an order or orders of the FCC, or of the Chief, Mass
Media Bureau of the FCC, acting under delegated authority, consenting to the
assignment to the Recipient Party of the FCC Licenses for the Transferring
Party's Stations.
"FINAL AR AMOUNT" shall have the meaning set forth in Section 2.7.2.
"FINAL PRORATION AMOUNT" shall have the meaning set forth in Section
2.6.2.
"FURTHER MEDIA INTEREST" shall have the meaning set forth in Section
6.18.
"GOVERNMENTAL AUTHORITY" means any agency, board, bureau, court,
commission, department, instrumentality or administration of the United States
government, any foreign government, any state government or any local or other
governmental body in a state, territory or possession of the United States or
the District of Columbia.
"HART-SCOTT-RODINO" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and all Laws promulgated pursuant thereto or in
connection therewith.
"HAT" shall have the meaning set forth in the Preamble.
"HAT AFFILIATED TRANSACTIONS" shall have the meaning set forth in
Section 4.19.
"HAT ASSETS" shall have the meaning set forth in Section 2.2.
"HAT BALANCE SHEETS" shall have the meaning set forth in Section 4.5.1.
"HAT BENEFIT PLANS" shall have the meaning specified in Section 4.14.1.
"HAT DOCUMENTS" shall mean the Bill of Sale and Assignment of Assets,
the Assignment of FCC Licenses, the Assignment of Contracts and Leases, the
Assumption Agreement, and the real property deeds delivered pursuant to Section
9.4.1(f).
"HAT EXCLUDED ASSETS" shall have the meaning set forth in Section 2.4.
"HAT LICENSE ASSETS" shall mean the FCC licenses of the HAT Stations.
ANNEX I-4
<PAGE> 85
"HAT NON-LICENSE ASSETS" shall have the meaning set forth in Section
2.2.
"HAT RETIREMENT PLAN" shall have the meaning set forth in Section
6.8.5.
"HAT STATIONS" shall have the meaning set forth in the Recitals.
"HAZARDOUS MATERIALS" means any wastes, substances, or materials
(whether solids, liquids or gases) that are deemed hazardous, toxic, pollutants,
or contaminants, including without limitation, substances defined as "hazardous
wastes," "hazardous substances," "toxic substances," "radioactive materials," or
other similar designations in, or otherwise subject to regulation under, any
Environmental Laws.
"HERITAGE AGREEMENT" shall have the meaning set forth in the Recitals.
"HERITAGE SUBSIDIARIES" shall have the meaning set forth in the
Recitals.
"HMC" shall have the meaning set forth in the Recitals.
"HSR FILING" shall have the meaning set forth in Section 5.2.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the respective
meanings set forth in Section 10.5.1.
"INTELLECTUAL PROPERTY" shall have the meaning set forth in Section
2.3.4.
"INTERIM OPERATION" shall have the meaning set forth in Section 2.11.3.
"KSBW" shall have the meaning set forth in the Recitals.
"KSBW RECEIVABLES" shall have the meaning set forth in Section 2.7.1.
"LAWS" means any federal, state or local law, foreign law, statute,
code, ordinance, regulation, order, writ, injunction, judgment or decree
applicable to the specified Person and to the businesses and assets thereof.
"LEASED PROPERTY" shall have the meaning set forth in Section 2.3.2(b).
"LIABILITIES" shall mean, as to any Person, all debts, adverse claims,
liabilities and obligations, direct, indirect, absolute or contingent of such
Person, whether accrued, vested or otherwise, whether in contract, tort, strict
liability or otherwise and whether or not actually reflected, or required by
generally accepted accounting principles to be reflected, in such Person's
balance sheets or other books and records.
"LICENSE ASSETS" shall mean individually the STC License Assets and the
HAT License Assets.
"LIKE-KIND EXCHANGE" shall have the meaning set forth in the Recitals.
ANNEX I-5
<PAGE> 86
"LKE FACILITATION TRANSACTIONS" shall have the meaning set forth in
Section 6.12.4.
"LOSSES" means any and all demands, claims, complaints, actions or
causes of action, suits, proceedings, investigations, arbitrations,
assessments, losses, damages, liabilities, obligations (including those arising
out of any action, such as any settlement or compromise thereof or judgment or
award therein) and any costs and expenses, including, without limitation,
reasonable attorneys' fees and disbursements.
"MATERIAL ADVERSE EFFECT" on either party's Stations means a material
adverse effect on the business, assets or financial condition of such Stations
taken as a whole, except for any such material adverse effect resulting from
(a) general economic conditions applicable to the television broadcast
industry, (b) general conditions in the markets in which such Stations operate,
(c) circumstances that are not likely to recur and either have been
substantially remedied or can be substantially remedied without substantial
cost or delay, or (d) the refusal by the other party to consent to any new
Program Contract.
"MULTIEMPLOYER PLAN" means any Plan described in Section 3(37) of
ERISA.
"NETWORK AGREEMENTS" shall have the meaning set forth in Section 2.3.8.
"NON-TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section
6.9.1.
"OPERATING CONTRACTS" shall have the meaning set forth in Section
2.3.9.
"ORDINARY COURSE OF BUSINESS" of a party's Stations means the ordinary
course of business of such Stations consistent with past practices of such
party both with respect to type and amount; any actions taken pursuant to the
requirements of law or contracts existing on the date hereof shall be deemed to
be action in the Ordinary Course of Business.
"PERMITTED ENCUMBRANCES" means (a) Encumbrances of a landlord, or
other statutory lien not yet due and payable, or a landlord's liens arising in
the Ordinary Course of Business, (b) Encumbrances arising in connection with
equipment or maintenance financing or leasing under the terms of a Station
Contract set forth on the Schedules, (c) Encumbrances arising pursuant to the
terms of leases on Real Property or Leased Property as set forth on Schedule
2.3.1 and Schedule 2.3.8 which are subject to any lease or sublease to a third
party, (d) Encumbrances for Taxes not yet due and payable or which are being
contested in good faith and by appropriate proceedings if adequate reserves
with respect thereto are maintained on the contesting party's books in
accordance with generally accepted accounting principles, (e) Encumbrances that
do not materially detract from the value of any of the Assets or materially
interfere with the use thereof as currently used, or (f) those Encumbrances on
Schedule 3.8 and Schedule 3.10 with respect to STC and those Encumbrances on
Schedule 4.8 and Schedule 4.10 with respect to HAT.
ANNEX I-6
<PAGE> 87
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization, other
form of business or legal entity or Governmental Authority.
"PLAN" of either party means any plan, program or arrangement, whether
or not written, that is or was an "employee benefit plan" as such term is
defined in Section 3(3) of ERISA and (a) which was or is established or
maintained by such party or any ERISA Affiliate for the benefit of any current
or former employees of its Stations; (b) to which such party contributed or was
obligated to contribute or to fund or provide benefits or had any liability
(whether actual or contingent) with respect to any of its assets or otherwise
for the benefit of any current or former employees of its Stations; or (c)
which provides or promises benefits to any person who performs or who has
performed services for its Stations and because of those services is or has
been (i) a participant therein or (ii) entitled to benefits thereunder.
"PREFERRED STC OWNERSHIP" shall have the meaning set forth in Section
6.12.4.
"PROGRAM CONTRACTS" shall have the meaning set forth in Section 2.3.5.
"PRORATION AMOUNT" shall have the meaning set forth in Section 2.6.1.
"PRORATION ITEMS" shall mean any power and utility charges, business
and license fees (including retroactive adjustments thereof), sales and service
charges, commissions, special assessments, and rental payments and personal and
real estate Taxes and assessments with respect to the Real Property, taxes
(except for Taxes arising from the transfer of the Assets hereunder), deposits,
Trade-out Agreements, unused sick leave pursuant to any collective bargaining
agreements and other similar prepaid and deferred items and any other operating
expenses incurred in the Ordinary Course of Business (except with respect to
Program Contracts, only those payments due and payable during the month in
which the Closing Date occurs shall be prorated). The parties acknowledge and
agree that there shall be excluded from Proration Items the following: (a)
severance pay relating to any employee of the Transferring Party who shall have
been terminated prior to the Exchange Date, (b) any Liabilities not being
assumed by the Recipient Party in accordance with Section 2.8, and (c) all
accrued and unpaid vacation pay.
"PROVIDENCE ASSETS" shall have the meaning set forth in Section 2.12.
"QI" shall have the meaning set forth in Section 6.12.5.
"QUALIFIED PLAN" of either party means a Plan that satisfies, or is
intended by such party to satisfy, the requirements for tax qualification
described in Section 401 of the Code including, without limitation, any Plan
that was terminated on or after July 1, 1989, as to which such party may have
any actual or contingent liability.
"REAL PROPERTY" shall have the meaning set forth in Section 2.3.2(a).
"RECIPIENT PARTY" shall have the meaning set forth in Section 2.3.
ANNEX I-7
<PAGE> 88
"RESTRICTED CONTRACTS" shall have the meaning set forth in Section
6.2.10(a).
"SALC" shall have the meaning set forth in Section 2.2.
"SCHEDULE REVIEW PERIOD" shall have the meaning set forth in Section
6.10(a).
"SCHEDULES" shall mean the disclosure schedules delivered by the
parties in connection herewith.
"SECTION 1031 SCHEDULE" shall have the meaning set forth in Section
2.8.2.
"SINCLAIR" shall have the meaning set forth in the Recitals.
"SINCLAIR AGREEMENT" shall have the meaning set forth in the Recitals.
"SINCLAIR COLLECTION PERIOD" shall have the meaning set forth in
Section 6.4.
"SINCLAIR DOCUMENTS" shall mean the Sinclair Agreement and any other
agreements, documents or certificates contemplated thereby or delivered in
connection therewith.
"SINCLAIR FILING DATE" shall have the meaning set forth in Section
3.9.3.
"SINCLAIR LIABILITIES" shall have the meaning set forth in Section
2.10.1.
"SINCLAIR PARENT" shall have the meaning set forth in the Recitals.
"SINCLAIR RECEIVABLES" shall have the meaning set forth in Section
2.4.2.
"STATION" and "STATIONS" shall have the meaning set forth in the
Recitals.
"STATION CONTRACTS" shall have the meaning set forth in Section 2.3.9.
"STC" shall have the meaning set forth in the Preamble.
"STC AFFILIATED TRANSACTIONS" shall have the meaning set forth in
Section 3.19.
"STC ASSETS" shall have the meaning set forth in Section 2.1.
"STC BALANCE SHEETS" shall have the meaning set forth in Section 3.5.1.
"STC BENEFIT PLANS" shall have the meaning specified in Section 3.14.1.
"STC BROADCASTING" shall have the meaning set forth in the Preamble.
"STCBV" shall have the meaning set forth in the Preamble.
ANNEX I-8
<PAGE> 89
"STCBV SUB" shall have the meaning set forth in the Preamble.
"STC DOCUMENTS" shall mean the Bill of Sale and Assignment of Assets,
the Assignment of FCC Licenses, the Assignment of Contracts and Leases, the
Assumption Agreement, and the real property deeds delivered pursuant to Section
9.3.1(f).
"STC EXCHANGE ENTITIES" shall have the meaning set forth in the
Preamble.
"STC EXCLUDED ASSETS" shall have the meaning set forth in Section 2.4.
"STC INDEMNIFIED PARTY" shall have the meaning set forth in Section
10.6(b).
"STC LICENSE ASSETS" shall mean the FCC Licenses of the STC Stations.
"STC LICENSE COMPANY" shall have the meaning set forth in the Preamble.
"STC NON-LICENSE ASSETS" shall have the meaning set forth in Section
2.1.
"STC PARTIES" shall have the meaning set forth in the Preamble.
"STC STATIONS" shall have the meaning set forth in the Recitals.
"STC RETIREMENT PLAN" shall have the meaning set forth in Section
6.8.5.
"STC TRANSFER DATE" shall have the meaning ascribed to such term under
the Sinclair Agreement.
"TAX CLAIM" shall have the meaning set forth in Section 10.6(c).
"TAX INCREASE" shall have the meaning set forth in Section 10.6(b).
"TAXES" means all federal, state and local taxes (including, without
limitation, income, profit, franchise, sales, use, real property, personal
property, ad valorem, excise, employment, social security and wage withholding
taxes) and installments of estimated taxes, assessments, deficiencies, levies,
imports, duties, license fees, registration fees, withholdings, or other
similar charges of every kind, character or description imposed by any
Governmental Authorities.
"TAX RETURNS" of either party means all federal, state, local, foreign
and other applicable Tax returns, declarations of estimated Tax reports
required to be filed by such party in connection with the business and
operations of its Stations (without regard to extensions of time permitted by
law or otherwise).
"TBA" means any time brokerage agreement, local marketing arrangement,
joint sales agreement, joint operating agreement, limited management agreement
or other similar agreement or contract.
ANNEX I-9
<PAGE> 90
"TIME SALES AGREEMENTS" shall have the meaning set forth in Section
2.3.7.
"TRADE-OUT AGREEMENTS" shall have the meaning set forth in Section
2.3.6.
"TRANSFER TAXES" shall have the meaning set forth in Section 12.3(a).
"TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section
6.9.1.
"TRANSFERRING PARTY'S PLAN" shall have the meaning set forth in Section
6.9.4.
"TUSCALOOSA" shall have the meaning set forth in the Recitals.
"WELFARE PLAN" means an "employee welfare benefit plan" as such term is
defined in Section 3(1) of ERISA.
"WDTN" shall have the meaning set forth in the Recitals.
"WDTN RECEIVABLES" shall have the meaning set forth in Section 2.7.1.
"WFFF" shall have the meaning set forth in the Recitals.
"WFFF LIABILITIES" shall mean all Liabilities of STC relating solely to
WFFF under the Sinclair Documents (or Liabilities relating solely to WFFF
assumed pursuant to the terms thereof), and all Liabilities arising out of
events occurring on or after the Non-License Transfer (as defined in the
Sinclair Agreement) relating solely to the business and operations of WFFF.
"WFFF TBA" shall have the meaning set forth in Section 2.11.3.
"WNAC" shall have the meaning set forth in the Recitals.
"WNAC/ARGYLE" shall have the meaning set forth in the Recitals.
"WNNE" shall have the meaning set forth in the Recitals.
"WNNE LICENSEE" shall have the meaning set forth in the Recital.
"WORKING CAPITAL ADVANCE" shall have the meaning set forth in Section
2.14.
"WPRI" shall have the meaning set forth in the Recitals.
"WPTZ" shall have the meaning set forth in the Recitals.
"WPTZ LICENSEE" shall have the meaning set forth in the Recitals.
ANNEX I-10
<PAGE> 1
Exhibit 10.32
FIRST AMENDMENT TO DEPOSIT ESCROW AGREEMENT
This First Amendment to Deposit Escrow Agreement (this "Amendment") is
made and entered into as of December 30, 1997, by and among STC Broadcasting,
Inc., a Delaware corporation ("Buyer"), William L. Andrews, the Carol Cagle
Trust, the Christine Cagle Testamentary Trust, the Larry Ackers GST Exempt
Trust, the Brandon Ackers Trust, Gary R. Ackers and the Glen Ackers Trust
(collectively, "Sellers") and George Mason Bank ("Escrow Agent").
RECITALS
WHEREAS, the Buyer, Sellers and Abilene Radio and Television Company
(the "Company") are amending that certain Stock Purchase Agreement, dated July
8, 1997, by and among Buyer, Sellers and the Company (the "Stock Purchase
Agreement");
WHEREAS, Buyer, Sellers and the Escrow Agreement desire to amend
certain provisions of that certain Deposit Escrow Agreement, dated July 8,
1997, by and among Buyer, Sellers and the Escrow Agent (the "Escrow
Agreement");
WHEREAS, Gary R. Ackers has power and authority to act on behalf of the
Sellers pursuant to the Escrow Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
AMENDMENT OF AGREEMENT
Section 1.5 of the Escrow Agreement is hereby amended to add thereto
the following at the end of each Section:
"Notwithstanding anything to contrary contained herein, Buyer
shall extend the expiration date of the Letter of Credit to April
30, 1998, and Sellers hereby consent to and approve such
extension."
<PAGE> 2
ARTICLE II
MISCELLANEOUS
Section 2.1 Defined Terms. All capitalized terms used and not defined
herein shall have the meanings ascribed to such terms in the Escrow Agreement
as hereby amended.
Section 2.2 Effect of Amendment. Except as specifically provided
herein, the Escrow Agreement is in all respects ratified and confirmed. All of
the terms, conditions and provisions of the Escrow Agreement as hereby amended
shall be and remain in full force and effect.
Section 2.3 Entire Agreement. This Amendment and the unaltered
portions of the Escrow Agreement, together with the Schedules and Exhibits
attached to the Escrow Agreement, represent the entire agreement and
understanding of the parties to the Escrow Agreement with respect to the
transactions contemplated herein and therein, and no representations,
warranties or covenants have been made in connection with this Amendment or the
Escrow Agreement, other than those expressly set forth herein and therein, or
in certificates delivered in accordance herewith or therewith. This Amendment
and the unaltered portions of the Escrow Agreement supersedes all prior
negotiations, discussions, correspondence, communications, understandings and
agreements among the parties relating to the subject matter of this Amendment
and the Escrow Agreement and such agreements and all prior drafts of this
Amendment and the Escrow Agreement and such other agreements are merged into
this Amendment and the unaltered portions of the Escrow Agreement.
Section 2.4 Amendments. This Amendment and the Escrow Agreement as
hereby amended may be amended or supplemented at any time by additional written
agreements signed by the parties hereto.
Section 2.5 Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas, without giving
effect to choice of laws principles.
Section 2.6 Seller Representative. Gary R. Ackers has all requisite
power and authority to execute and deliver this Amendment on behalf of all the
Sellers pursuant to Section 3.10 of the Escrow Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 3
This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall be considered
one and the same agreement.
STC BROADCASTING, INC.
By: /s/ David A. Fitz
-----------------
Name: David A. Fitz
Title: Senior Vice President
SELLERS
By: /s/ Gary R. Ackers
------------------
Gary R. Ackers,
Sellers Representative
GEORGE MASON BANK
By: /s/ J. Catherine Hirsch
-----------------------
Name: J. Catherine Hirsch
Title: Senior Vice President
<PAGE> 1
Exhibit 10.33
DEPOSIT
ESCROW AGREEMENT
THIS DEPOSIT ESCROW AGREEMENT (this "Escrow Agreement") is made and
entered into as of this 3rd day of February, 1998, by and among STC
BROADCASTING OF VERMONT, a Delaware corporation ("Buyer"), TUSCALOOSA
BROADCASTING, INC., a Maryland corporation ("Tuscaloosa"), WPTZ LICENSEE, INC.,
a Maryland corporation ("WPTZ Licensee"), and WNNE LICENSEE, INC., a Maryland
corporation ("WNNE Licensee") (Tuscaloosa, WPTZ Licensee and WNNE Licensee,
collectively, the "Sellers" and, individually a "Seller"), and GEORGE MASON
BANK, as deposit escrow agent (the "Escrow Agent").
RECITALS
WHEREAS, Buyer and Sellers have entered into an Asset Purchase
Agreement dated as of February 3, 1998 (the "Purchase Agreement") pursuant to
which Sellers have agreed to sell, assign, transfer, convey and deliver to
Buyer, and Buyer has agreed to purchase from Sellers, the Assets (as defined in
the Purchase Agreement), all in accordance with and subject to the terms and
conditions set forth in the Purchase Agreement;
WHEREAS, pursuant to the Purchase Agreement, Buyer is required to
deliver to the Escrow Agent an original, irrevocable letter of credit (the
"Letter of Credit") issued for the benefit of Sellers (and for the purposes of
Section 1.5 hereof, the Escrow Agent) in the amount of Seven Million Two
Hundred Thousand Dollars ($7,200,000) in the form attached hereto as Appendix
A; and
WHEREAS, unless otherwise defined herein, capitalized terms used
herein shall have the meanings assigned to them in the Purchase Agreement.
AGREEMENTS
Accordingly, in consideration of the recitals and of the respective
agreements and covenants contained herein and in the Purchase Agreement, and
intending to be legally bound hereby, the parties agree as follows:
<PAGE> 2
ARTICLE I
Section 1.1 Letter of Credit Escrow.
(a) Contemporaneously with the execution of this Escrow
Agreement, Buyer has delivered the Letter of Credit to the Escrow Agent,
pursuant to the provisions of the Purchase Agreement.
(b) The Letter of Credit, any proceeds from the Letter of
Credit payable by its terms to the Escrow Agent and any interest or income
accrued thereon (the "Funds") are referred to herein as the "Escrowed
Property". The Escrowed Property shall be held, administered and disposed of
by the Escrow Agent in accordance with the terms and conditions hereinafter set
forth.
Section 1.2 Acceptance of Appointment as Escrow Agent. The Escrow
Agent, by signing this Escrow Agreement, accepts its appointment as escrow
agent with respect to the Escrowed Property and agrees to hold and deliver the
Escrowed Property in accordance with the terms of this Escrow Agreement.
Section 1.3 Delivery of Letter of Credit to Sellers. Not more than
five (5) business days after (a) the delivery to the Escrow Agent of written
instructions signed by Buyer and Sellers stating that the Letter of Credit is
to be delivered to Sellers, or (b) the delivery to the Escrow Agent of a copy
of a Final Determination (as defined below) establishing the right of Sellers
to the Letter of Credit, the Escrow Agent shall deliver the Letter of Credit to
Sellers as provided in such instructions or Final Determination. A "Final
Determination" shall mean a final non-appealable judgment of a court of
competent jurisdiction. The Escrow Agent, at its option, shall be entitled to
seek and, if received, rely conclusively upon a written opinion of legal
counsel to the effect that a Final Determination delivered to the Escrow Agent
pursuant to this Escrow Agreement satisfies the requirements hereof.
Section 1.4 Delivery of Letter of Credit to Buyer. Except as
otherwise provided in the last sentence of this Section 1.4, not more than five
(5) business days after (a) the delivery to the Escrow Agent of written
instructions signed by Buyer and Sellers stating that the Letter of Credit is
to be delivered to Buyer, or (b) the delivery to the Escrow Agent of a copy of
a Final Determination establishing Buyer' right to the Letter of Credit, the
Escrow Agent shall deliver the Letter of Credit to Buyer as provided in such
instructions or Final Determination. On the Transfer Date, simultaneously upon
receipt by the Escrow Agent of written instructions signed by Buyer and Sellers
stating that the Letter of Credit is to be delivered to Buyer, the Escrow Agent
shall deliver the Letter of Credit to Buyer or its representative.
Section 1.5 Replacement of Letter of Credit.
(a) Buyer may provide to Sellers for its approval at least
forty-five (45) calendar days before the expiration of the Letter of Credit a
form of (i) an extension of the original Letter
-2-
<PAGE> 3
of Credit issued by the issuer of the then expiring Letter of Credit (with no
modifications to the original Letter of Credit other than extending the
expiration date for at least an additional ninety (90) days after the then
expiration date of the Letter of Credit), or (ii) a substitute Letter of Credit
in a form identical to Appendix A (with an expiration date of not less than
ninety (90) days after the expiration date set forth in the then expiring
Letter of Credit) issued by the issuer of the original Letter of Credit or by a
United States bank having assets and a net worth (as established by the most
recent public financial information of such bank, copies of which shall be
provided by Buyer to Sellers) equal to or greater than the bank which issued
the then expiring Letter of Credit, together with a statement signed by an
officer of Buyer, in each case, certifying that such substitute Letter of
Credit or extension will comply with the foregoing requirements. If Sellers
approve such form of substitute Letter of Credit or extension in writing (such
approval not to be unreasonably withheld, conditioned or delayed) and Buyer
delivers to the Escrow Agent an original of such substitute Letter of Credit or
extension (duly executed by the issuing bank) and the written approval of
Sellers, at least thirty (30) calendar days before the expiration of the Letter
of Credit, such substitute Letter of Credit (or such then expiring Letter of
Credit as extended by the extension) shall thereafter be deemed the "Letter of
Credit" for all purposes hereunder; and if a substitute Letter of Credit is
being provided, the Escrow Agent shall simultaneously exchange the prior Letter
of Credit for the substituted Letter of Credit and give receipts, if requested
by Buyer, for the same.
(b) In the event that (i) Buyer delivers a form of substitute
Letter of Credit and the Sellers do not approve the form thereof, or (ii) Buyer
does not deliver an original substitute Letter of Credit to the Escrow Agent
(or an extension of the expiring Letter of Credit) at least thirty (30)
calendar days before the expiration of the then expiring Letter of Credit,
Buyer may not replace the Letter of Credit, and upon written instructions
signed by Sellers, the Escrow Agent shall immediately present the Letter of
Credit for payment (with a drawing certificate signed by Sellers) and hold the
funds drawn pursuant thereto in accordance with the terms of this Escrow
Agreement notwithstanding any actual or alleged default hereunder or under the
Purchase Agreement by any party or any instruction to the contrary by Buyer or
any other person, and notwithstanding any other state of facts.
Section 1.6 Investment of Proceeds of Letter of Credit.
(a) If the Letter of Credit is drawn by the Escrow Agent
or Sellers because it will expire and Buyer has not replaced it pursuant to and
in accordance with Section 1.5, upon receipt of the Funds of such drawing
pursuant to the terms of the Letter of Credit, the Escrow Agent shall hold the
Funds in escrow in lieu of the Letter of Credit, and shall invest the Funds in
Permitted Investments (as defined in (b) below). The Escrow Agent shall hold
and release the Funds in accordance with the terms of this Escrow Agreement
(all references herein to the Letter of Credit being deemed to be references to
the Funds for such purpose).
(b) "Permitted Investments" shall mean direct obligations
of the United States government having maturities of 90 days or less, money
market funds that invest solely in direct obligations of the United States
government, repurchase agreements, and such other investments as may be
specified from time to time by joint written instructions from Buyer and
Sellers to the
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<PAGE> 4
Escrow Agent; provided, such other investments are consistent with the Escrow
Agent's investment criteria. The Escrow Agent will act upon investment
instructions the day that such instructions are received, provided the requests
are communicated within a sufficient amount of time to allow the Escrow Agent
to make the specified investment. Instructions received after an applicable
investment cutoff deadline will be treated as being received by the Escrow
Agent on the next business day, and the Escrow Agent shall not be liable for
any loss arising directly or indirectly, in whole or in part, from the
inability to invest funds on the day the instructions are received. The Escrow
Agent shall not be liable for any loss incurred by the actions of third parties
or by any loss arising by error, failure or delay in making of an investment or
reinvestment, and the Escrow Agent shall not be liable for any loss of
principal or income in connection therewith, unless such error, failure or
delay results from the Escrow Agent's gross negligence or willful misconduct.
As and when the Funds are to be released under this Escrow Agreement, the
Escrow Agent shall cause the Permitted Investments to be converted into cash
and shall not be liable for any loss of principal or income in connection
therewith. Neither Sellers, Buyer nor the Escrow Agent shall be liable for any
loss of principal or income due to the choice of Permitted Investments in which
the Funds are invested or the choice of Permitted Investments converted into
cash pursuant to this paragraph (b).
(c) All interest or other income on the Funds, if any,
shall be the property of Buyer and shall be distributed by the Escrow Agent to
Buyer by check upon the earlier of (i) the making of a drawing under the Letter
of Credit, or (ii) the expiration of the Letter of Credit, less the amount
payable by the Escrow Agent to Sellers under Section 1.6(d), if any. The
parties acknowledge that payment of any interest earned on the funds invested
in this escrow will be subject to backup withholding penalties unless a
properly completed Internal Revenue Service form W-8 or W-9 certification is
submitted to the Escrow Agent.
(d) For tax purposes, the Funds shall be the property of
Buyer and all interest and other income earned on the Funds shall be the income
of Buyer. Buyer and Sellers shall file Tax Returns and the Escrow Agent shall
file a Form 1099 consistent with such treatment. In the event that the
Internal Revenue Service or any other governmental authority successfully
claims that the interest and other income earned on the Funds is taxable to
Sellers for any taxable period, Buyer shall promptly pay to Sellers cash equal
to the product of the Effective Tax Rate times all amounts paid by the Escrow
Agent to Buyer pursuant to Section 1.6(c) for such taxable period, plus
interest on such amount at the rate specified by section 6621(a)(2) of the Code
and corresponding provisions of applicable state and local laws, and the Escrow
Agent shall thereafter make monthly distributions to Sellers of cash equal to
the product of the Effective Tax Rate times the income distributable pursuant
to Section 1.6(c) for such period. The term "Effective Tax Rate" shall mean
the highest marginal effective combined federal, state and local income tax
rate applicable with respect to Sellers as reasonably computed and provided to
the Escrow Agent by Sellers.
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<PAGE> 5
ARTICLE II
ESCROW AGENT
Section 2.1 Language Concerning the Escrow Agent. To induce the
Escrow Agent to act hereunder, it is further agreed by Sellers and Buyer that:
(a) The Escrow Agent shall not be under any duty to give
the Escrowed Property any greater degree of care than it gives its own similar
property and shall not be required to invest any funds held hereunder except as
directed in this Escrow Agreement. Uninvested funds held hereunder shall not
earn or accrue interest.
(b) This Escrow Agreement expressly sets forth all the
duties of the Escrow Agent with respect to any and all matters pertinent
hereto. No implied duties or obligations shall be read into this Escrow
Agreement against the Escrow Agent. The Escrow Agent shall not be bound by the
provisions of any agreement between Sellers and Buyer except this Escrow
Agreement.
(c) The Escrow Agent shall not be liable, except for its
own gross negligence or willful misconduct and, except with respect to claims
based upon such gross negligence or willful misconduct that are successfully
asserted against the Escrow Agent. The Buyer and Sellers shall jointly and
severally indemnify and hold harmless the Escrow Agent (and any successor
Escrow Agent) from and against any and all losses, liabilities, claims,
actions, damages and expenses, including reasonable attorneys' fees and
disbursements, arising out of and in connection with this Escrow Agreement.
Without limiting the foregoing, the Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash held by it hereunder
in good faith, in accordance with the terms hereof, including without
limitation, any liability for any delays (not resulting from its gross
negligence or willful misconduct) in the investment or reinvestment of the
Funds or any loss of interest incident to any such delays.
(d) The Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
or the correctness of any fact stated therein or the propriety or validity or
the service thereof. The Escrow Agent may act in reliance upon any instrument
or signature believed by it to be genuine and may assume that any person
purporting to give receipt or advice or make any statement or execute any
document in connection with the provisions hereof has been duly authorized to
do so. Without limiting the generality of the foregoing, the Escrow Agent may
rely on any extension or Letter of Credit delivered to it as constituting the
Letter of Credit hereunder for all purposes unless notified in writing by
Sellers to the contrary prior to its substitution.
(e) The Escrow Agent may act pursuant to the advice of
counsel with respect to any matter relating to this Escrow Agreement and shall
not be liable for any action taken or omitted in accordance with such advice.
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<PAGE> 6
(f) The Escrow Agent (and any successor Escrow Agent) may
at any time resign as such by delivering the Escrowed Property to any successor
Escrow Agent jointly designated by each of Sellers and Buyer in writing or to
any court of competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Escrow Agreement. The resignation of the Escrow Agent will take
effect on the earlier of (i) the appointment of a successor (including a court
of competent jurisdiction) or (ii) the day which is thirty (30) days after the
date of delivery of its written notice of resignation to each of Sellers and
Buyer. If at that time the Escrow Agent has not received a designation of a
successor Escrow Agent, the Escrow Agent's sole responsibility after that time
shall be to safekeep the Escrowed Property until receipt of a designation of
successor Escrow Agent or a joint written disposition instruction by each of
Sellers and Buyer or a final order of a court of competent jurisdiction.
(g) The Escrow Agent shall have no responsibility for the
contents of any writing of the arbitrators or any third party contemplated
herein as a means to resolve disputes and may rely without any liability upon
the contents thereof.
(h) In the event of any disagreement between Sellers and
Buyer resulting in adverse claims or demands being made in connection with the
Escrowed Property, or in the event that the Escrow Agent in good faith is in
doubt as to what action it should take hereunder, the Escrow Agent shall retain
the Escrowed Property until the Escrow Agent shall have received (x) a Final
Determination directing delivery of the Escrowed Property or (y) a written
agreement executed by Sellers and Buyer directing delivery of the Escrowed
Property, in which event the Escrow Agent shall disburse the Escrowed Property
in accordance with such order or agreement. The Escrow Agent, at its option,
shall be entitled to seek and, if obtained, rely conclusively upon an opinion
of independent counsel to the effect that any court order delivered to the
Escrow Agent is a Final Determination. The Escrow Agent shall act on such
court order and legal opinion without further question.
(i) The compensation of the Escrow Agent (as payment in
full) for the services to be rendered by the Escrow Agent hereunder shall be
paid one-half by Buyer and one-half by Sellers in the aggregate amount of Five
Hundred Dollars ($500.00) per annum, together with reimbursement for all
reasonable expenses, disbursements and advances incurred or made by the Escrow
Agent in performance of its duties hereunder (including reasonable fees,
expenses and disbursements of its counsel). All fees and expenses of the
Escrow Agent hereunder, other than the initial fee paid upon the execution
hereof, shall be paid first out of interest, dividends, and other income earned
on the Funds, if any, and then, to the extent of any shortfall, by Buyer. Any
fees or expenses of the Escrow Agent or its counsel which are not paid as
provided for herein may be taken from any property held by the Escrow Agent
hereunder. It is understood that the Escrow Agent's fees may be adjusted from
time to time to conform to its then current guidelines.
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<PAGE> 7
ARTICLE III
MISCELLANEOUS
Section 3.1 Notices. All notices, requests, consents or other
communications required or permitted under this Escrow Agreement shall be in
writing and shall be deemed to have been duly given or delivered by any party
(a) when received by such party if delivered by hand, (b) upon confirmation
when delivered by telecopy (any communication delivered by telecopy shall be
followed promptly with an original thereof), (c) within one day after being
sent by recognized overnight delivery service, or (d) within three business
days after being mailed by first-class mail, postage prepaid, and in each case
addressed as follows:
(i) if to Buyer:
c/o STC Broadcasting, Inc.
3839 4th Street North, Suite 420
St. Petersburg, Florida 33703
Attention: David A. Fitz
Telecopy No.: (813) 821-8092
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, NW
Washington, DC 20004-1109
Attention: William S. Reyner, Jr., Esq.
Telecopy No.: (202) 637-5910
(ii) if to Sellers, to:
Sinclair Broadcast Group, Inc.
2000 West 41st Street
Baltimore, Maryland 21211
Attention: Robert E. Quicksilver
Telecopy No.: (410) 662-4707
(iii) if to the Escrow Agent, to:
George Mason Bank
1667 K Street, N.W.
Washington, DC 20006
Attention: J. Catherine Hirsch
Telecopy No.: (202) 293-6966
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<PAGE> 8
Any party by written notice to the other parties pursuant to this Section 3.1
may change the address or the persons to whom notices or copies thereof are to
be sent to it by giving written notice of a change of address in the manner
provided in this Escrow Agreement for giving notice.
Section 3.2 Assignment. This Escrow Agreement and the rights and
duties hereunder shall be binding upon and inure to the benefit of the parties
hereto and the successors and assigns of each of the parties to this Escrow
Agreement. No rights, obligations or liabilities hereunder shall be assignable
by any party without the prior written consent of the other parties, except
that Buyer may assign its rights under this Escrow Agreement without obtaining
the prior written consent of the other parties hereto to any person or entity
to whom, pursuant to the Purchase Agreement, Buyer is permitted to assign all
or any portion of its rights under the Purchase Agreement, provided that any
such assignee duly executes and delivers an agreement to assume Buyer'
obligations under this Escrow Agreement.
Section 3.3 Amendment. This Escrow Agreement may be amended or
modified only by an instrument in writing duly executed by the parties to this
Escrow Agreement.
Section 3.4 Waivers. Any waiver by any party hereto of any breach of
or failure to comply with any provision of this Escrow Agreement by any other
party hereto shall be in writing and shall not be construed as, or constitute,
a continuing waiver of such provision, or a waiver of any other breach of, or
failure to comply with, any other provision of this Escrow Agreement.
Section 3.5 Construction. This Escrow Agreement shall be construed
and enforced in accordance with and governed by the internal substantive laws
of the State of New York without regard to conflicts of laws principles. The
headings in this Escrow Agreement are solely for convenience of reference and
shall not be given any effect in the construction or interpretation of this
Escrow Agreement. Unless otherwise stated, references to Sections and Exhibits
are references to Sections and Exhibits of this Escrow Agreement.
Section 3.6 Third Parties. Nothing expressed or implied in this
Escrow Agreement is intended, or shall be construed, to confer upon or give any
person or entity other than Buyer, Sellers and the Escrow Agent any rights or
remedies under, or by reason of, this Escrow Agreement.
Section 3.7 Termination. This Escrow Agreement shall terminate at
the time of the delivery by the Escrow Agent of the Letter of Credit or the
Funds, if any, to Sellers or Buyer, as the case may be, in accordance with the
provisions of this Escrow Agreement.
Section 3.8 Counterparts. This Escrow Agreement may be executed in
one or more counterparts, each of which shall be deemed any original and all of
which together shall constitute a single instrument.
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<PAGE> 9
Section 3.9 Waiver of Offset Rights. The Escrow Agent hereby waives
any and all rights to offset that it may have against the Letter of Credit
including, without limitation, claims arising as a result of any claims,
amounts, liabilities, costs, expenses, damages, or other losses (collectively,
"Claims") that the Escrow Agent may be otherwise entitled to collect from any
party to this Escrow Agreement, other than Claims arising under this Escrow
Agreement.
[The remainder of this page is intentionally left blank.]
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<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Deposit Escrow
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
STC BROADCASTING OF VERMONT, INC.
By: /s/ David A. Fitz
----------------------------------
Name: David A. Fitz
Title: Chief Financial Officer
TUSCALOOSA BROADCASTING, INC.,
By: /s/ David B. Amy
----------------------------------
Name: David B. Amy
Title: Treasurer and Secretary
WPTZ LICENSEE, INC.
By: /s/ David B. Amy
----------------------------------
Name: David B. Amy
Title: Treasurer and Secretary
WNNE LICENSEE, INC.
By: /s/ David B. Amy
----------------------------------
Name: David B. Amy
Title: Treasurer and Secretary
GEORGE MASON BANK
By: /s/ J. Catherine Hirsch
----------------------------------
Name: J. Catherine Hirsch
Title: Senior Vice President
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<PAGE> 1
Exhibit 10.34
WAIVER
WAIVER, dated as of March 11, 1998 (this "Waiver") to the Credit
Agreement, dated as of February 28, 1997 (as amended by the First Amendment,
dated as of March 25, 1997, and as may be further amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among STC
BROADCASTING, INC., a Delaware corporation (the "Borrower"), the several banks
and other financial institutions or entities from time to time parties thereto
(the "Lenders"), NATIONSBANK OF TEXAS, N.A., as documentation agent (in such
capacity, the "Documentation Agent"), and THE CHASE MANHATTAN BANK, as
administrative and syndication agent for the Lenders thereunder (in such
capacity, the "Administrative Agent").
WITNESSETH:
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
make and have made, certain Loans to the Borrower; and
WHEREAS, the Borrower has requested that the Lenders waive, and the
Lenders have agreed to waive, certain of the provisions of the Credit
Agreement, upon the terms and subject to the conditions set forth below:
NOW, THEREFORE, the parties hereto agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined are used herein as defined in the Credit Agreement.
2. Waiver of Subsection 7.7. The Lenders hereby waive the
requirements of subsection 7.7 for the fiscal year ended
December, 1997.
3. Johnstown Station Waiver. The Lenders hereby waive for a period
not to exceed 90 days from the date hereof any Default or Event of
Default resulting solely from the failure of the Borrower to
transfer the Station License under the authority of which
television station WJAC-TV, Channel 6, Johnstown, Pennsylvania
(the "Johnstown Station") is operated, to a separate License
Subsidiary.
4. Effectiveness. This waiver shall become effective on the date the
Administrative Agent shall have received counterparts of this
Waiver, duly executed and delivered by the Borrower and the
Required Lenders.
5. Representations and Warranties. On and as of the date hereof after
giving effect to this Waiver, the Borrower hereby represents and
warrants to the Lenders that:
(a) Each of its representations and warranties contained in
Section 4 of the Credit Agreement or in any certificate,
document or financial or other statement furnished at any
time under or in connection therewith are true and correct
in all material respects on and as of such date as if made
on and as of such date,
<PAGE> 2
except to the extent that such representations and warranties
specifically relate to an earlier date, in which case such
representations and warranties shall be true and correct in all
material respects as of such earlier date; provided that the
references to the Credit Agreement therein shall be deemed to include
this Waiver; and
(b) No Default or Event of Default has occurred and is continuing.
6. Continuing Effect; No Other Amendments. Except as expressly waived
hereby, all of the terms and provisions of the Credit Agreement
and the other Loan Documents are and shall remain in full force
and effect. The waivers contained herein shall not constitute a
waiver of any other provision of the Credit Agreement or the other
Credit Documents or for any purpose except as expressly set forth
herein.
7. GOVERNING LAW; Counterparts. (a) THIS WAIVER SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
(b) This Waiver may be executed in any number of counterparts, all
of which counterparts, taken together, shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have caused this Waiver to be duly executed and
delivered by their respective proper and duly authorized officers as of the day
and year first above written.
STC BROADCASTING, INC.
/s/ David A. Fitz
--------------------------------
Chief Financial Officer
THE CHASE MANHATTAN BANK,
As administrative Agent and as a Lender
By: /s/ David Staples
------------------------------
Vice President
NATIONSBANK OF TEXAS, N.A., as
Documentation Agent and as a Lender
By: /s/ Jennifer Zydney
------------------------------
Vice President
FINOVA CAPITAL CORPORATION
By: /s/Andrew J. Pluta
------------------------------
Vice President
<PAGE> 1
Exhibit 10.35
December 16, 1994
WJAC, Inc.
c/o WJAC-TV
1949 Hickory Lane
Johnstown, Pennsylvania 15905
Gentlemen:
In connection with that certain Affiliation Agreement (the
"Agreement") dated December 16, 1994 between NBC Television Network ("NBC") and
WJAC, Inc., licensee of television broadcast station WJAC-TV, Johnstown,
Pennsylvania (collectively, the "Station"), the Station and NBC hereby agree as
follows:
1. NBC hereby confirms that Paragraphs 2 and 3 of the Agreement
notwithstanding, the Station shall not be obligated to clear "Meet the
Press" (or any replacement programming) until January 8, 1995.
Commencing as of January 8, 1995, Station agrees to clear "Meet the Press"
(or any replacement programming) each Sunday in its Live Time Period as
scheduled by NBC in accordance with Paragraphs 2 and 3 of the Agreement.
2. Each defined term used herein without definition shall have the meaning
assigned to such term in the Agreement.
Please indicate your acceptance of the foregoing by signing in the
space indicated below.
Very truly yours,
NBC TELEVISION NETWORK
By: /s/ Robert J. Niles
--------------------------------
Name: Robert J. Niles
Title: Sr. Vice President of
Affiliate Relations
The foregoing has been reviewed by, and is acceptable to, WJAC, Inc.
By: /s/ James M. Edwards, Sr.
---------------------------------
Name: James M. Edwards, Sr.
Title: President
<PAGE> 2
December 16, 1994
WJAC, Inc.
c/o WJAC-TV
1949 Hickory Lane
Johnstown, Pennsylvania 15905
RE: WJAC-TV (Johnstown, Pennsylvania)
Gentlemen:
The following shall comprise the agreement between us for the
affiliation of your television broadcasting station WJAC-TV (you and WJAC-TV
collectively herein called "Station") with the NBC Television Network (herein
called "NBC") and shall supersede and replace our prior agreement dated
December 30, 1989, except for the most recent amendment with respect to network
non-duplication protection under Federal Communications Commission ("FCC")
Rules Section 76.92.
1 Term. This Agreement shall be deemed effective as of 3:00 A.M., New
York City time on the 1st day of November, 1994, and, unless sooner
terminated as provided in this Agreement, it shall remain in effect
for a period of ten (10) years thereafter. It shall then be renewed
on the same terms and conditions for a further period of five (5)
years and for successive further periods of five (5) years each,
unless and until either party shall, at least twelve (12) months prior
to the expiration of the then current term, give the other party
written notice that it does not desire to have this Agreement renewed
for a further period.
2. NBC Programming.
(a) NBC shall deliver to Station for free, over-the-air television
broadcasting all programming which NBC makes available for
broadcasting in the community to which Station is presently
licensed by the FCC, except as otherwise expressly provided herein.
(b) NBC commits to supply sufficient programming throughout the term of
this Agreement for the hours presently programmed by it (the
"Programmed Time Periods"), which Programmed Time Periods are as
follows (the specified times are all local time in Station's community
of license):
Prime Time: Monday thru Saturday - 8:00 - 11:00 P.M.
Sunday - 7:00 - 11:00 P.M.
Late Night: Monday thru Thursday - 11:35 P.M. - 2:05 A.M.
Friday - 11:35 P.M. - 2:35 A.M.
Saturday - 11:30 P.M. - 1:00 A.M.
News: Monday thru Friday - 6:00 - 6:30 A.M.,
7:00 - 9:00 A.M., and 6:30 - 7:00 P.M.
Saturday - 7:00 - 9:00 A.M. and 6:30 - 7:00 P.M.
Sunday - 8:00 - 10:00 A.M. and 6:30 - 7:00 P.M.
<PAGE> 3
Daytime: Monday thru Friday - 10:00 A.M. - 12:00 Noon and
1:00 - 3:00 P.M.
Saturday - 10:00 A.M. - 12:30 P.M.
The selection, scheduling, substitution and withdrawal of any program
or portion thereof delivered to Station during the Programmed Time Periods
shall at all times remain within the sole discretion and control of NBC. The
parties acknowledge that local and network programming needs may change during
the term of this Agreement, and each party agrees throughout the term to
negotiate in good faith with the other party any proposed modification of the
Programmed Time Periods.
(c) In addition to the programming supplied pursuant to Paragraph 2(b)
above, NBC shall offer Station throughout the term of this Agreement a variety
of sports, special events and overnight news programming for television
broadcast at times other than the Programmed Time Periods. Station shall have
the right of first refusal with respect to any such programming good for
seventy-two (72) hours as against any other television station located in
Station's community of license or any television program transmission service
furnishing a television signal to Station's community of license, including,
but not limited to, any community antennae television system, subscription
television service, multipoint distribution system and satellite transmission
service. Station shall notify NBC of its acceptance or rejection of NBC's
offer of such programming as promptly as possible. Station's acceptance of
NBC's offer shall constitute Station's agreement to broadcast such programming
in accordance with the terms of such offer and this Agreement. Notwithstanding
any other provision in this Agreement, no pre-existing acceptance of NBC
programming shall be superseded or otherwise affected by this Agreement, and
those acceptances shall remain in full force and effect. With respect to NBC
programs outside the Programmed Time Periods (either offered or already
contracted for pursuant to this Agreement), nothing herein contained shall
prevent or hinder NBC from (i) substituting one or more sponsored or sustaining
programs, in which event NBC shall offer such substituted program or programs
to Station in accordance with the provisions of this Paragraph 2(c), or (ii)
canceling one or more such NBC programs; provided, however, that NBC shall
exercise all reasonable efforts to give Station at least three (3) weeks prior
written notice of such substitution or cancellation. Station shall not be
obligated to broadcast, and NBC shall not be obligated to continue to deliver,
subsequent to the termination of this Agreement, any programs which NBC may
have offered and which Station may have accepted during the term hereof.
3. Station Carriage in Programmed Time Periods.
(a) Station agrees that, subject only to preemption rights contained in
Paragraph 4(c) below, including Station's unqualified right to preempt for
local live coverage of news events, Station shall broadcast over Station's
facilities all NBC programming supplied to Station for broadcast in the
Programmed Time Periods on the dates and at the times the programs are
scheduled by NBC, except to the extent that Station is actually broadcasting
programming pursuant to (and within the specified limits of) a commitment
contemplated by Paragraph 3(b) below.
(b) As an inducement for NBC to enter into this Agreement, Station
covenants, represents and warrants to NBC that during any Broadcast Year (as
hereinafter defined) during the term hereof, Station shall preempt no more than
thirty (30) hours in the
<PAGE> 4
aggregate of NBC programs during the Prime Time Programmed Time Period for any
reason other than for the live coverage of news events (the "Prime Time
Preemption Amount"). For the purposes of this Agreement, a "Broadcast Year"
shall mean a twelve (12) month period during the term hereof which commences on
any September 1 during the term hereof and which ends on August 31 of the
immediately following year. Station hereby confirms that its rights and
obligations under this Paragraph 3(b) are consistent with its rights and
obligations referred to in Paragraph 4(c) below.
(c) The Station hereby agrees to accept and clear all sports programming
offered to the Station by NBC outside the Programmed Time Periods ("NBC Sports
Programming"), except for NBC sports programming which directly conflicts with
Station's coverage of sports events and special events of particular local
interest (collectively, such coverage of such sports events and special events
are referred to below as "Special Programs"). Station acknowledges the
substantial investment in network sports programming to be incurred during the
term of this Agreement in order to provide Station with network-quality sports
programming. Station further acknowledges that in view of NBC's substantial
investment in network sports programming and Station's rights under this
Paragraph 3(c), Station does not foresee any need to substitute programming of
any kind for NBC sports Programming, except as follows with respect to Special
Programs. Station agrees not to broadcast more than fifty (50) hours of
Special Programs outside the Programmed Time Periods in the aggregate during
any Broadcast Year during the term of this Agreement which would conflict with
NBC Sports Programming outside the Programmed Time Periods (the "Sports
Preemption Amount").
(d) Notwithstanding the foregoing provisions of subparagraphs (b) and (c)
above and without limiting the provisions thereof, Station agrees that, in any
one (1) month period during a Broadcast Year, Station's preemptions of NBC
Prime Time programs and NBC Sports Programming shall not exceed 20% of,
respectively, the Prime Time Preemption Amount and the Sports Preemption
Amount, unless otherwise consistent with Station's programming practice.
4. Preemptions.
(a) In the event that Station, for any reason, fails to broadcast or
advises NBC that it will not broadcast any NBC programming as provided herein,
then, in each case, Station, upon notice from NBC to Station, shall broadcast
such omitted programming and the commercial announcements contained therein (or
any replacement programming and the commercial announcements contained therein)
during a time period or periods which the parties shall promptly and mutually
agree upon and which shall, to the extent possible, be of a quality and rating
value comparable to that of the time period or periods at which such omitted
programming was not broadcast as provided herein. In the event that the
parties do not promptly agree upon a time period or periods as provided in the
preceding sentence, then, without limitation to any other rights of NBC under
this Agreement or otherwise, NBC shall have the right to license the broadcast
rights to the applicable omitted programming (or replacement programming) to
another television station located in Station's community of license.
(b) For the purposes of this Agreement, an "Authorized Preemption" shall
mean: any failure to broadcast due to force majeure as provided for in
Paragraph 12 below, any preemption permitted by Paragraphs 3(b), 3(c) or 3(d)
above, and any preemption permitted by Paragraph 4(c) below. Any other
preemption or failure to broadcast any
<PAGE> 5
NBC programming shall be deemed an "Unauthorized Preemption" and, without
limiting any other rights of NBC under this Agreement or otherwise, upon NBC's
request, Station shall pay NBC, or NBC may deduct or offset from any amounts
payable to Station hereunder or under any other agreement between Station and
NBC (or an entity controlling, controlled by or under common control with NBC),
an amount equivalent to NBC's loss in net advertising revenues attributable to
the failure of Station to broadcast such program in Station's market as
scheduled by NBC, which amount shall be calculated in accordance with Exhibit A
hereto. Any failure by Station to pay any amount due under this Paragraph 4(b)
shall be deemed a material breach of this Agreement, and NBC shall have the
option, exercisable in its sole discretion upon thirty (30) days written notice
to Station, to either (i) terminate Station's right to broadcast any one or
more series or other NBC programs, as NBC shall elect, and, to the extent and
for the period(s) that NBC elects, thereafter license the broadcast rights to
such series or other NBC program(s) to any other television station or stations
located in Station's community of license or (ii) unless the breach is cured
within such thirty (30) day period, terminate this Agreement.
(c) With respect to programs offered or already contracted for pursuant to
this Agreement, nothing herein contained shall be construed to prevent or
hinder Licensee from: (i) rejecting or refusing any NBC program which Station
reasonably believes to be unsatisfactory or unsuitable or contrary to the
public interest, or (ii) substituting a program which, in Station's opinion, is
of greater local or national importance; provided, however, that Station shall
give NBC written notice of each such rejection, refusal or substitution, and
the reason therefor, at least three (3) weeks in advance of the scheduled
broadcast, or as soon thereafter as possible (including an explanation of the
cause for any lesser notice). Programming shall be deemed to be unsatisfactory
or unsuitable or contrary to the public interest only if: (A) it is delivered
in a form which does not meet accepted standards of good engineering practice;
(B) it does not comply with the rules and regulations of the FCC; or (C)
Station reasonably believes that such programming would not meet prevailing
contemporary standards of good taste in its community of license. Station
acknowledges that NBC programming previously broadcast by Station has been
consistent with the foregoing standards; Station also agrees that Station's
reasonable belief that an NBC program does not meet such standards will be
based on a substantial difference in such program's style and content from NBC
programs previously broadcast by Station, unless the relevant standards in the
Station's community of license have changed. Station confirms that no NBC
programming shall be deemed to be unsatisfactory, unsuitable or contrary to the
public interest based on programming performance or ratings, advertiser
reaction or the availability of alternative programming (including, but not
limited to, sporting events, program length commercials and infomercials, and
other paid programming) which Station believes to be more profitable or more
attractive. Station acknowledges the substantial investment in network
programming to be incurred during the term of this Agreement in order to
provide Station with network-quality news, public affairs, entertainment,
sports, children's and other programming during the Programmed Time Periods.
Station further acknowledges that in view of NBC's substantial investment in
network programming, the amount of broadcast time available to Station outside
the Programmed Time Periods and Station's rights under Paragraph 3(b) above,
Station does not foresee any need to substitute programming of any kind for NBC
programming, except in those circumstances requiring local live coverage of
news events.
5. Station Compensation. In further consideration of Station's
performance of its
<PAGE> 6
obligations under this Agreement NBC shall compensate Station as follows:
(a) (i) NBC shall pay Station for Station's broadcast of each network
sponsored program or portion thereof (except those specified in Paragraph 5(b)
below) which is broadcast during the Live Time Period therefor the amount
resulting from multiplying the following:
(A) Station's Network Station Rate, which is $1950; by
(B) The percentage set forth in the compensation matrix table
attached hereto as Exhibit B (the "Compensation Table") opposite the
applicable time period; by
(C) The fraction of an hour substantially occupied by such program
or portion thereof; by
(D) The fraction of the aggregate length of all Commercial
Availabilities during such program or portion thereof occupied by
Network Commercial Announcements.
As used herein, "Live Time Period" shall mean the time period or
periods as specified by NBC for the broadcast of a program by Station;
"Commercial Availability" shall mean a period of time made available by NBC
during a network sponsored program for one or more Network Commercial
Announcements; and "Network Commercial Announcement" shall mean a commercial
announcement broadcast over Station during a Commercial Availability and paid
for by or on behalf of one or more of NBC's network advertisers, not including,
however, announcements consisting of billboards, credits, public service
announcements, promotional announcements and announcements required by law.
(ii) For each network sponsored program or portion thereof (except those
specified in Paragraph 5(b) below) which is broadcast by Station during a time
period other than the Live Time Period therefor, NBC reserves the right, in its
sole discretion, to withhold payment of compensation for such program. If NBC
does not withhold payment of compensation for such program, NBC shall pay
Station as if Station had broadcast the program or portion thereof during such
Live Time Period, except that if the percentage set forth in the Compensation
Table opposite the time period during which Station broadcasts the program or
portion thereof is less than that set forth opposite such Live Time Period, NBC
shall pay Station on the basis of the time period during which Station
broadcasts the program or portion thereof.
(b) NBC shall pay Station such amounts as NBC and Station shall agree upon
for all network sponsored programs broadcast by Station consisting of:
(i) Sports programs;
(ii) Special events programs, and
(iii) Programs for which NBC specifies a Live Time Period which
straddles any of the time period categories in the Compensation Table.
<PAGE> 7
(c) (i) On or about the fifteenth day of the last month of each
calendar quarter during the term hereof, subject to the timely receipt of
reports requested under Paragraph 10 below, NBC shall pay Station, by
electronic transfer or such other means as NBC shall determine, an estimate of
the amounts due hereunder for such calendar quarter. NBC shall make the
appropriate adjustment for the payment actually due for such calendar quarter
in the payment of the estimated amount due for the next calendar quarter. NBC
shall calculate the amounts due hereunder on a weekly basis and shall report
such amounts to Station within a reasonable period of time after the close of
each month during the term.
(ii) From the amounts otherwise payable to Station hereunder, NBC
shall deduct for each calendar quarter during the term hereof a sum equal to
217% of Station's Network Station Rate (the "Waiver Percentage"). This
deduction shall be calculated on a weekly basis, with 4.2857 as the agreed
number of weeks per month, and shall be reported to Station with the reports
due under subparagraph 5(c) (i) above. NBC shall make other deductions from
the amounts otherwise payable to Station hereunder for additional services made
available by NBC and utilized by Station such as, but not limited to, NBC News
Channel.
(d) (i) Subject to the limitations set forth in the following
sentence, NBC reserves the right as part of a general rate revision to
reevaluate and change at any time: (A) the Network Station Rate set forth in
subparagraph 5(a) (i) above, (B) the percentages set forth in the Compensation
Table, or (C) the Waiver Percentage set forth in subparagraph 5(c)(ii) above,
by giving written notice to Station at least thirty (30) days prior to the
effective date of such change. Notwithstanding the foregoing, NBC agrees that:
(X) the Compensation Table attached hereto as Exhibit B shall be modified
during the term of this Agreement only as mutually agreed to by NBC and Station
or as may be recommended by the NBC Affiliate Board; and (Y) NBC may increase
the Waiver Percentage only by reason of an increase in NBC's technical costs of
delivering programming to the NBC Television Network; provided that any such
increase in the Waiver Percentage shall be subject to review by the NBC
Affiliate Board.
(ii) Notwithstanding anything contained in subparagraph 5(d)(i) to
the contrary, the parties acknowledge that the payment of compensation to
Station hereunder is in consideration of certain commitments by Station,
including commitments regarding Station's local news program schedule and
promotion of NBC programming as respectively set forth in Exhibits C and D
attached hereto, which Exhibits are incorporated herein by this reference. In
the event that Station does not fulfill (A) the commitments set forth in
Exhibit C or (B) such commitments as are set forth in Exhibit D in all years
during the term of this Agreement, NBC reserves the right to decrease Station's
Network Station Rate and the percentages in the Compensation Table and to
increase Station's Waiver Percentage by notifying Station in writing at least
ninety (90) days prior to the effective date of such change.
6. Additional Consideration. In consideration of Station's entering into
this Agreement and Station's performance of its obligations under this
Agreement, NBC agrees to pay to WJAC, Inc. the additional amounts (the
"Additional Payments") set forth on Exhibit E hereto.
7. Local Commercial Announcements.
<PAGE> 8
Station shall at all times during the term of this Agreement be
entitled to the same number of local commercial announcements in and adjacent
to NBC programming as are made available to NBC affiliates generally at such
time. In the even of a material reduction in the total aggregate duration in
minutes of all local commercial announcements available to Station in any
Broadcast Year (as compared with the prior Broadcast Year) in and adjacent to
regularly scheduled NBC programming then offered (not including national sports
programming and other special events), the effects of which reduction are not
offset by comparable economic benefit to the Station, Station's sole remedy
shall be the right to terminate this Agreement upon ninety (90) days written
notice, which notice may be served by Station within sixty (60) days after the
end of any Broadcast Year in which such material reduction occurs. The parties
agree, however, that if such comparable economic benefit is received by Station
prior to the end of such ninety (90) day notice period, such termination shall
not become effective.
8. Delivery. NBC shall transmit the programming hereunder by satellite and
shall notify Station as to both the satellite and transponder being used for
such transmission, and the programming shall be deemed delivered to Station
when transmitted to the satellite. Where, in the opinion of NBC, it is
impractical or undesirable to furnish a program over satellite facilities, NBC
may deliver the program to Station in any other manner, including but not
limited to, in the form of motion picture film, video tape or other recorded
version, postage prepaid, in sufficient time for Station to broadcast the
program at the time scheduled. Such recordings shall be used only for a single
television broadcast over Station, and Station shall comply with all NBC
instructions concerning the disposition to be made of each such recording
received by Station hereunder.
9. Conditions of Station's Broadcast. Station's broadcast of NBC programming
shall be subject to the following terms and conditions:
(a) Station shall not make any deletions from, or additions or
modifications to, any NBC program furnished to Station hereunder or any
commercial, NBC identification, program promotional or production credit
announcements or other interstitial material contained therein, nor broadcast
any commercial or other announcements (except emergency bulletins) during any
such program, without NBC's prior written authorization. Station may, however,
delete announcements promoting any NBC program which is not to be broadcast by
Station, provided that such deletion shall be permitted only in the event and
to the extent that Station substitutes for any such deleted promotional
announcements other announcements promoting NBC programs to be broadcast by
Station.
(b) For purposes of identification of Station with the NBC programs, and
until written notice to the contrary is given by NBC, Station may superimpose
on various Entertainment programs, where designated by NBC, a single line of
type, not to exceed fifty (50) video lines in height and situated in the lower
eighth raster of the video screen, which single line shall include (and be
limited to) Station's call letters, community of license or home market,
channel number, and the NBC logo. No other addition to any Entertainment
program is contemplated by this consent, and the authorization contained herein
specifically excludes and prohibits any addition whatsoever to News and Sports
programs, except identification of Station as provided in the preceding
sentence as required by the FCC.
(c) The placement and duration of station-break periods provided for
locally
<PAGE> 9
originated announcements between NBC programs or segments thereof shall
be designated by NBC. Station shall broadcast each NBC program delivered to
Station hereunder from the commencement of network origination until the
commencement of the terminal station break.
(d) In the event of the confirmation by NBC of any violation by Station of
any of the provisions of this Paragraph 9, NBC may, in its reasonable
discretion, withhold an amount of compensation otherwise due Station under
Paragraph 5 above which is appropriate in view of the nature of the specific
violation, it being understood that the amount withheld for any violation shall
not exceed the total compensation due Station for the week in which such
violation occurs. Nothing herein contained shall limit the rights of Station
under Paragraph 4(c) above.
10. Station Reports. Station shall submit to NBC in writing, upon forms
provided by NBC, such reports as NBC may request covering the broadcast by
Station of programs furnished to Station hereunder.
11. Music Performance Rights. All programs delivered to Station pursuant to
this Agreement shall be furnished with all music performance rights necessary
for broadcast by Station included. Station shall have no responsibility for
obtaining such rights from ASCP, BMI or other music licensing societies insofar
as the programs delivered by NBC to Station for broadcasting are concerned. As
used in this paragraph, "programs" shall include, but shall not be limited to,
program and promotional material and commercial and public service
announcements furnished by NBC. Station shall be responsible for all music
license requirements for any commercial and public service announcements or
other material inserted by Station within or adjacent to the programs as
permitted under the terms of this Agreement, except for cut-ins produced by or
on behalf of NBC and inserted by Station at NBC's direction.
12. Force Majeure. Neither Station nor NBC shall incur any liability
hereunder because of NBC's failure to deliver, or the failure of Station to
broadcast, any or all programs due to failure of facilities, labor disputes,
government regulations or causes beyond the reasonable control of the party so
failing to deliver or to broadcast. Without limiting the generality of the
foregoing, NBC's failure to deliver a program for any of the following reasons
shall be deemed to be for causes beyond NBC's reasonable control: cancellation
of a program because of the death, illness or refusal to appear or perform of a
star or principal performer thereon, or because of such person's failure to
conduct himself or herself with due regard to social conventions and public
morals and decency, or because of such person's commission of any act or
involvement in any situation or occurrence tending to degrade him or her in
society, or bringing him or her into public disrepute, contempt, scandal or
ridicule, or tending to shock, insult or offend the community, or tending to
reflect unfavorably upon NBC or the program sponsor.
13. Indemnification. NBC shall indemnify, defend and hold Station, its
parent, subsidiary and affiliated companies, and their respective directors,
officers and employees, harmless from and against all claims, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) arising
out of the use by Station, in accordance with this Agreement, of any program or
other material as furnished by NBC hereunder, provided that Station promptly
notifies NBC of any claim or litigation to which this indemnity shall apply,
and that Station cooperates fully with NBC in the defense or settlement of such
claim or litigation. Similarly, Station shall indemnify, defend and hold
<PAGE> 10
NBC, its parent, subsidiary and affiliated companies, and their respective
directors, officers and employees, harmless with respect to material added to
or deleted from any program by Station, except for cut-ins produced by or on
behalf of NBC and inserted by Station at NBC's direction. These indemnities
shall not apply to litigation expenses, including attorneys' fees, which the
indemnified party elects to incur on its own behalf. Except as otherwise
provided herein, neither Station nor NBC shall have any rights against the
other for claims by third persons, or for the non-operation of facilities or
the non-furnishing of programs for broadcasting, if such non-operation or
non-furnishing is due to failure of equipment, actions or claims by any third
person, labor disputes, or any cause beyond such party's reasonable control.
14. Station's Right of First Negotiation. Throughout the term of this
Agreement, NBC shall give Station prompt notice of any determination by NBC to
engage in new over-the-air broadcast ventures within Station's community of
license (whether or not involving the transmission of television programs, but
excluding any acquisition of an ownership interest in any broadcast television
station) (a "Broadcast Venture"). NBC shall negotiate exclusively with Station
in good faith, for a period of time following such notice to Station as shall
be determined by NBC to be appropriate to the circumstances and as shall be
specified in such notice, with respect to Station's participation on a
financial and/or operational basis in any such Broadcast Venture within
Station's community of license before NBC may enter into any such negotiations
with a Third Party (as defined below) within such community of license. "Third
Party" shall mean any person or entity other than an NBC Party; "NBC Party"
shall mean any of NBC, National Broadcasting Company, Inc. or their respective
parent, subsidiary, affiliated, related or successor entities.
15. Change in Operations. Station represents and warrants that it holds a
valid license granted by the FCC to operate the Station as a television
broadcast station; such representation and warranty shall constitute a
continuing representation and warranty by Station. In the event that Station's
transmitter location, power, frequency, programming format or hours of
operation are materially changed at any time so that Station is of less value
to NBC as a broadcaster of NBC programming than at the date of this Agreement,
then NBC shall have the right to terminate this Agreement upon thirty (30) days
prior written notice to Station.
16. Assignment.
(a) This agreement shall not be assigned without the prior written consent
of NBC, and any permitted assignment shall not relieve Station of its
obligations hereunder. Any purported assignment by Station without such
consent shall be null and void and not enforceable against NBC.
(b) Station agrees to include as a condition of any proposed assignment or
transfer a contractually binding provision that the assignee or transferee
shall assume and become bound by this Agreement for (i) the remainder of the
then-current term of this Agreement or (ii) three (3) years from the date of
said assignment or transfer, whichever period is greater. Station acknowledges
that any such assignment or transfer which does not so provide for such
assumption and for NBC's right to extend the term of this Agreement will cause
NBC irreparable injury for which damages are not an adequate remedy. Therefore,
Station agrees that NBC shall be entitled to seek an injunction or similar
relief from any court of competent jurisdiction restraining Station from
committing any violation
<PAGE> 11
of this Paragraph 16(b).
(c) Station agrees that if any application is made to the FCC pertaining
to an assignment or a transfer of control of Station's license, or any interest
therein, Station shall immediately notify NBC in writing of the filing of such
application. Except as to "short form" assignments or transfers of control
made pursuant to Section 73.3540(f) of the FCC Rules, NBC shall have the right
to terminate this Agreement in the event of any assignment or transfer.
Station agrees, except in the case of "short form" assignments or transfers of
control, that promptly following Station's notice to NBC, Station (i) shall
arrange for a meeting between NBC and the proposed assignee or transferee to
review the financial and operating plans of the proposed assignee or
transferee, and (ii) shall procure and deliver to NBC, in form satisfactory to
NBC, the agreement of the proposed assignee or transferee that, upon
consummation of the assignment or transfer of control of the Station's license,
the assignee or transferee will assume and perform this Agreement in its
entirety without limitation of any kind. If Station complies with its
obligations set forth in the preceding sentence and NBC does not terminate this
Agreement upon written notice to Station within the thirty (30) day period
following the later of the meeting with the proposed assignee or transferee or
the delivery to NBC of a satisfactory assumption agreement, NBC shall be deemed
to have consented to the assignment or transfer of control.
17. Unauthorized Copying and Transmission. Station shall not authorize,
cause, or permit, without NBC's consent, any program or other material
furnished to Station hereunder to be recorded, duplicated, rebroadcast or
otherwise transmitted or used for any purpose other than broadcasting by
Station as provided herein. Notwithstanding the foregoing, Station shall not
be restricted in the exercise of its signal carriage rights pursuant to any
applicable rule or regulation of the FCC with respect to retransmission of its
broadcast signal by any cable system or multichannel video program distributor
("MVPD"), as defined in Section 76.64(d) of the FCC Rules, which (a) is located
within the Area of Dominant Influence ("ADI"), as defined by Arbitron, in which
Station is located, or (b) was actually carrying Station's signal as of April
1, 1993, or (c) with respect to cable systems, serving an area in which Station
is "significantly viewed" (as determined by the FCC) as of April 1, 1993;
provided, however, that any such exercise pursuant to FCC Rules with respect to
NBC programs shall not be deemed to constitute a license by NBC. NBC reserves
the right to restrict such signal carriage with respect to NBC programming in
the event of a change in applicable law, rule or regulation.
18. Limitations on Retransmission Consent. In consideration of the grant by
NBC to Station of the non-duplication protection provided in the most recent
amendment to this Agreement, Station hereby agrees as follows:
(a) Station shall not grant consent to the retransmission of its
broadcast signal by any cable television system, or, except as provided in
Paragraph 18(b) below, to any other MVPD whose carriage of broadcast signals
requires retransmission consent, if such cable system or MVPD is located
outside the ADI to which Station is assigned, unless Station's signal was
actually carried by such cable system or MVPD as of April 1, 1993. or, with
respect to such cable system, is "significantly viewed" (as determined by the
FCC) as of April 1, 1993; provided, however, that at each renewal of the
Agreement, in the event Station can demonstrate to NBC that it is
"significantly viewed" (as determined by the FCC) in areas in addition to those
in which it was "significantly viewed" as of April 1, 1993 ("Additional Viewing
Areas"), NBC agrees that it will negotiate
<PAGE> 12
in good faith with Station regarding a possible extension of Station's grant of
the right to retransmit its broadcast signal to cable systems in the Additional
Viewing Areas.
(b) Station shall not grant consent to the retransmission of its broadcast
signal by any MVPD that provides such signal to any home satellite dish user,
unless such user is located within Station's own ADI or is an "unserved
household" as defined in Section 119(d) or any successor provision of Title 17
of the United States Code.
19. Remedies for Unauthorized Copying and Transmission. If Station violates
any of the provisions set forth in Paragraphs 17 and 18 above, NBC may, in
addition to any other of its rights or remedies at law or in equity under this
Agreement or any amendment thereto, terminate this Agreement by written notice
to Station given at least ninety (90) days prior to the effective date of such
termination.
20. Applicable Law. The obligations of Station and NBC under this Agreement
are subject to all applicable federal, state, and local laws, rules and
regulations (including, but not limited to, the Communications Act of 1934, as
amended, and the rules and regulations of the FCC), and this Agreement and all
matters or issues collateral thereto shall be governed by the law of the State
of New York applicable to contracts negotiated, executed and performed entirely
therein.
21. Waiver. A waiver by either of the parties hereto of a breach of any
provision of this Agreement shall not be deemed to constitute a waiver of any
preceding or subsequent breach of the same provision or any other provision
hereof.
22. Notices. Any notices hereunder shall be in writing and shall be given by
personal delivery, overnight courier service, or registered or certified mail,
addressed to the respective addresses set forth on the first page of this
Agreement or at such other address or addresses as may be specified in writing
by the party to whom the notice is given. Such notices shall be deemed given
when personally delivered, delivered to an overnight courier service or mailed,
except that notice of change of address shall be effective only from the date
of its receipt.
23. Captions. The captions of the paragraphs in this Agreement are for
convenience only and shall not in any way affect the interpretation hereof.
24. Entire Agreement. The foregoing constitutes the entire agreement between
Station and NBC with respect to the subject matter hereof, all prior
understandings being merged herein, except for the most recent amendment with
respect to network non-duplication protection under FCC Rules Section 76.92.
This Agreement may not be changed, modified, renewed, extended or discharged,
except as specifically provided herein or by an agreement in writing signed by
the parties hereto.
25. Confidentiality. The parties agree to use their best efforts to preserve
the confidentiality of this Agreement and of the terms and conditions set forth
herein, and the exhibits annexed hereto, to the fullest extent permissible by
law. The parties recognize that Section 73.3613 of the FCC's Rules and
Regulations requires the filing with the FCC of television network affiliation
agreements by each affiliate, but are unaware of any requirement for the filing
of exhibits annexed to such affiliation agreements. In the event that the FCC
should request either party to file said exhibits, that party shall give prompt
notice to the other, and shall submit said exhibits to the FCC with a request
that said
<PAGE> 13
exhibits be withheld from public inspection pursuant to Section 0.459 of the
FCC's Rules and Regulations on the grounds that said exhibits contain
confidential commercial or financial information that would customarily be
guarded from competitors and not be released to the public.
26. Counterparts. This Agreement may be signed in any number of counterparts
with the same effect as if the signature to each such counterpart were upon the
same instrument.
If the foregoing is in accordance with your understanding, please
indicate your acceptance on the copy of this Agreement enclosed for that
purpose and return that copy to NBC.
Very truly yours,
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ Robert J. Niles
----------------------------------
AGREED:
WJAC, Inc.
By: /s/ James M. Edwards, Sr.
---------------------------
<PAGE> 14
EXHIBIT "A"
Adjustments due to an Unauthorized Preemption of an NBC program (as
utilized in Paragraph 4(b) of the Agreement) will be calculated using the
following two factors:
1. "Station's NBC delivery percentage" which is the Station's audience
contribution to NBC Network programs expressed as a percentage. (This is the
same NBC delivery percentage used in the annual compensation evaluation.)
2. "Program revenue" which is the average NBC Network revenue for the
preempted program. (NOTE: Program revenue will be the average revenue per
program based on total annual revenue for that program, except revenue for each
prime time program, which will be adjusted for the day of the week and the
quarter in which the program is aired.)
Station's NBC delivery percentage is multipled by the program revenue
to yield the dollar adjustment. An example:
Station preempts "Program X"
Station's NBC Network delivery % = 2.1%
NBC's revenue for "Program X" = $900,000
$900,000 x 2.1% = $18,900 payment to NBC
<PAGE> 15
EXHIBIT "B"
WJAC-TV, JOHNSTOWN, PENNSYLVANIA
Compensation Matrix
(NETWORK STATION RATE $1950 X HOURS CARRIED X % BELOW)
MON - SUN 6 PM - 11 PM 30%
- --------------------------------------------------------------------------------
MON - SUN 5 PM - 6 PM * 15%
11 PM - 1 AM
SAT - SUN 4 PM - 5 PM
- --------------------------------------------------------------------------------
MON - FRI 9 AM - 5 PM 13.12%
- --------------------------------------------------------------------------------
SUN 7 AM - 4 PM 10.5%
SAT 2 PM - 4 PM
- --------------------------------------------------------------------------------
SAT 7 AM - 2 PM 7.88%
- --------------------------------------------------------------------------------
NIGHTLY NEWS MON - FRI 0%
NIGHTLY NEWS SAT - SUN 10%
- --------------------------------------------------------------------------------
TONIGHT SHOW 7.5%
- --------------------------------------------------------------------------------
LATE NIGHT 10.25%
- --------------------------------------------------------------------------------
FRIDAY NIGHT 4.75%
- --------------------------------------------------------------------------------
LATER 4%
- --------------------------------------------------------------------------------
SATURDAY NIGHT LIVE 6.67%
- --------------------------------------------------------------------------------
*EXCLUDING NIGHTLY NEWS
All times above are expressed in terms of your station's then current local
time.
<PAGE> 16
EXHIBIT "C"
WJAC-TV NEWS PROGRAMS
Monday - Friday
6:30 - 7:00 A.M.
12:00 Noon - 12:30 P.M.
5:30 - 6:30 P.M.
11:00 - 11:35 P.M.
Saturday
6:00 - 6:30 P.M.
11:00 - 11:30 P.M.
Sunday
6:00 - 6:30 P.M.
11:00 - 11:35 P.M.
<PAGE> 1
Exhibit 10.36
AGREEMENT
This Agreement made and entered into this 2nd day of October, 1997, by
and between WJAC-TV (hereinafter referred to as "Employer") and International
Alliance of Theatrical Stage Employees, Moving Picture Technicians, Artists and
Allied Crafts of the United States of America, TBSE, Local 902 (hereinafter
referred to as "Union"):
WITNESSETH:
WHEREAS, the Union was duly certified by the National Labor Relations
Board as the exclusive bargaining agent of a unit of employees engaged in
television broadcasting at television station WJAC in Johnstown, Pennsylvania,
and its other facilities;
WHEREAS, the parties hereto desire to enter into a new Agreement to
establish the standards and conditions under which such employees shall work
for the Employer during the term hereof, replacing and cancelling the previous
collective bargaining agreement in place for the bargaining unit which was
scheduled to expire on October 31, 1997.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties do hereby agree as follows:
BASIC PRINCIPLES
The Employer and the Union have a common and sympathetic interest in
the television broadcasting business. Both parties recognize the benefits to
be realized from harmonious relations between them and the advantage of
peaceful and common sense adjustment of any differences.
Every effort will be made to settle all disputes and controversies
amicably. Accordingly, the Union and the Employer shall immediately bring to
the attention of each other all matters which may require adjustment and shall
acquaint each other with all problems which may arise and which are of mutual
interest.
<PAGE> 2
ARTICLE I
RECOGNITION
Section 1 -- Scope of Jurisdiction: The Employer recognizes the Union
as the exclusive bargaining representative of all full-time and part-time
employees of the Employer engaged in television broadcasting at its television
station WJAC in Johnstown, Pennsylvania and said station's facilities, as noted
in Article VI (Wages and Compensation), and excluding all sales and traffic
department employees, clerical and reception employees, accounting department
employees, program director, program assistant, promotion director, promotion
assistant, production/operations supervisor, chief engineer, assistant chief
engineers, news director, assistant news directors, producer/directors,
assignment manager, news, weather, and sports anchors for 5:00 p.m., 5:30 p.m.,
6:00 p.m. and 11:00 p.m. broadcasts, and all other supervisors, and guards as
defined in the Act.
The Union warrants that it is the representative of the majority of
the employees included in the unit for the purposes of collective bargaining
with respect to rates of pay, hours, and other terms and conditions of
employment.
The Employer may enter into personal services agreements with anchors
and reporters in the bargaining unit upon mutually agreeable terms and
conditions as long as the terms of such individual agreements meet or exceed
the requirements of this Agreement.
Section 2 -- "Facilities": The term "facilities" shall include the
broadcasting equipment used at the station operation sites of WJAC, including
the transmitter, mobile or remote operations of such station.
ARTICLE II
UNION SECURITY
Section 1 -- Union Membership: As a condition of continued employment,
all employees covered under this Agreement shall be required to become and
remain members of the Union, to the extent of tendering the periodic dues and
initiation fees, on or after the thirtieth (30th) day of their employment, or
the execution of this Agreement. The failure of an employee to so tender the
required dues and initiation fees and to maintain membership in good standing
therein shall obligate the Employer to discharge such employee within ten (10)
days after receipt of written demand from the Union for such discharge, such
demand to set forth specifically the ground thereof, and if the ground be the
failure to satisfy their financial obligation to the Union, then the amount
thereof and whether such amount represents dues, assessments, or initiation
fee.
Section 2 -- Check-Off: The Employer shall deduct from each
employee's wages the amount of the Union dues, as specified by the Union, of
all employees covered by this Agreement who have voluntarily provided the
Employer with a written assignment authorizing such deductions. Such
deductions to be remitted to the Union on a monthly basis accompanied
2
<PAGE> 3
by a remittance report indicating the names of the employees, the gross wages,
and the amount deducted.
The Union agrees to indemnify the Employer against any and all
charges, suits or claims for damages and penalties that shall arise out of or
by reason of any action that shall be taken by the Employer for the purpose of
complying with the foregoing provision.
Section 3 -- Non-Discrimination: Neither the Employer nor the Union
shall discriminate in any manner against any of the employees by reason of any
past or future activity on the part of the employees in the affairs of the
Union.
Section 4 -- New Hires: When the Employer requires additional
personnel, it shall make reasonable effort to offer available opportunities to
current qualified employees. Furthermore, the Employer shall notify the Union
for the purpose of providing equal opportunity with all other sources to
furnish suitable applicants. This provision shall not interfere with the
Employer's right, in its sole discretion, to select the new employee,
regardless of source.
Within ten (10) calendar days after the hiring of any new bargaining
unit employee, the Employer shall furnish in writing to the Union the name,
date of hire and job classification of the new employee.
Section 5 -- Access to Premises: For the purposes of administrating
this Agreement, an authorized agent of the Union shall have reasonable rights
of visitation and inspection at the station and its facilities during normal
working hours; provided, however, that the exercise thereof shall not interfere
with, nor interrupt, the Employer's normal course of business and operations.
Section 6 -- Shop Steward: The Employer shall recognize the Union
Steward as the on-site representative of the Union. It shall be the
responsibility of the Steward to ensure compliance with the terms and
conditions of this Agreement on the part of both the Employer and employees.
The Steward shall receive the cooperation of all Supervisors in so doing and
shall be permitted reasonable opportunity to fulfill that responsibility
without disrupting the operation of the Station.
Section 7 -- Union Bulletin Board: The Employer shall designate where,
and grant permission to the Union, to place two bulletin boards at the Station
for the posting of information pertaining to its members.
Section 8 -- Subcontracting: The Employer may engage in reasonable
subcontracting. If a decision to subcontract is made, the Employer will
bargain with the Union over the impact and effects of such contracting as it
relates to the bargaining unit. This provision shall be utilized for the
purpose of allowing the Employer to maintain its standards of equipment and
operation at the Station where it does not have sufficiently qualified
employees to perform such tasks.
3
<PAGE> 4
Nothing in this provision shall restrict the Employer's right to
utilize the services of news stringers outside a fifty (50) mile radius from
the Station. This limitation shall not apply to planned Friday night coverage
of high school football contests.
Section 9 -- Part-Time Employees: Part-time employees may be utilized
to perform bargaining unit work on a daily basis. Individual part-time
employees may not be normally scheduled to work more than twenty-four (24)
hours in any seven (7) day period commencing with such employee's first work
day in that period. Such part-time employees shall not be scheduled to work
beyond twelve (12) consecutive hours on any day.
The above limitation on maximum hours per week shall not apply to
part-time employees who performed services at WJAC prior to the commencement of
this Agreement.
Section 10 -- Performance of Bargaining Unit Work: Nothing shall
prevent nonbargaining unit personnel from performing bargaining unit work in
the case of emergency, instructional or training purposes, or vacation relief,
nor shall it prevent the Station from temporarily assigning bargaining unit
employees to nonbargaining positions or promoting same to nonbargaining unit
positions.
Section 11 -- Interns: The Station may utilize the services of
interns or others who qualify as persons with special needs for the purposes of
broadcast training, course credit or mentoring programs. Such persons may be
utilized to assist the Station in its operations and will perform services
under the general supervision of Station Management and bargaining unit
employees. Interns may not be used in a manner which supplants bargaining unit
positions.
ARTICLE III
DISCIPLINE AND DISCHARGE
Section 1 -- Just Cause: No employee covered by this Agreement who has
completed his or her probationary period shall be suspended, demoted or
dismissed without just and sufficient cause. Without limitation on the
Employer's right to determine grounds for discipline or discharge, the
following items are listed as examples of just and sufficient cause for
termination:
o Violation of safety or security regulations.
o Excessive absenteeism or tardiness.
o Falsification of records or information.
o Theft of Station or another employee's property.
o Possession of firearms or weapons on Station property.
o Deliberate destruction of or damage to Station property,
equipment, or the property of a fellow employee.
o Bringing or selling intoxicants or narcotics, having
intoxicants or narcotics in one's possession, or
being under the influence of an intoxicant or
narcotic on Company property or while on Company
business.
4
<PAGE> 5
o Performing personal work on Company time.
o Improper conduct, such as sexual harassment or any
other behavior recognized as improper by a reasonable
and prudent individual.
o Unsatisfactory job performance or neglect of duty.
o Violation of any Company rules.
o Insubordination.
Section 2 -- Interviews and Investigations: The Employer will ensure
that employees shall have the opportunity to have a Union representative
present at any interview or investigation conducted by the Employer or its
Representatives if the charges against the employee could lead to discharge.
ARTICLE IV
HOURS
Section 1 -- Work Week: The basic work week for all covered employees
shall consist of a forty (40) hour week in five (5) days at eight (8) hours per
day with two (2) consecutive days off, or such other combination of days and
hours as deemed appropriate by the Employer (i.e., four (4) days at ten (10)
hours per day) as long as the employee is not subject to split shifts, and,
further, is scheduled so as to receive at least two (2) consecutive days off.
The work day shall be exclusive of a one-hour or one-half hour unpaid lunch
break, which shall be determined on a case-by-case basis by the Department
Head in consultation with the General Manager.
Work day hours are to be on a regularly scheduled basis subject to
changes if not less than five (5) days notice posted by Noon, Tuesday for the
week subsequent.
Section 2 -- Minimum Call: Once an employee has left the premises at
the conclusion of his or her shift, the minimum call for all overtime work
shall be four (4) hours. Employees shall be required to work the entire call
when pre-scheduled. When called in for an emergency, the employee shall be
released upon resolution of said emergency, and overtime pay shall only be paid
for those hours actually worked.
Section 3 -- Tour of Duty: A tour of duty beginning in one day and
continuing into the following day shall be considered as one assignment and
attributed to and deemed to have been performed in total on the day when such
tour was started.
Section 4 -- Preparatory Time: Employees scheduled for the Monday
sign-on duties shall be scheduled in at least twenty (20) minutes prior to air
time for the purpose of preparing equipment, checking logs and programs.
Section 5 -- Closedown Time: Employees scheduled for the Sunday
sign-off duties shall be given four (4) minutes after the official log sign-off
time, for the purpose of making equipment checks and accomplishing other work
necessary in closing down the station.
5
<PAGE> 6
Section 6 -- Turn Around: There shall be a break of at least eight (8)
hours between the termination of the employee's last work shift and the
commencement of his/her next work shift. Employees who are required to work
during their turnaround periods will receive time and one-half compensation for
the hours worked by them during the turnaround period.
ARTICLE V
OVERTIME
Section 1 -- Overtime:
A. Employees who work in excess of forty (40) hours within the
basic work week shall be paid for such overtime work at time and one-half the
straight time rate of pay. At the Employer's option, an employee may be given
an amount of time equal to the amount of overtime hours in compensating time
off during the current work week and be paid at the straight time rate of pay.
The appropriate amount of time must be taken in the current work week. Any
unused compensation time, at the end of a work week shall be paid for at one
and one-half the straight time rate of pay.
B. When a single shift exceeds twelve (12) hours of work or when
more than twelve (12) hours is worked in a calendar day, compensation time will
be accrued at time and one-half for the amount of time in excess of twelve (12)
hours.
C. All overtime and premium time shall be computed to the next
quarter hour based on the completion of more than fifty (50%) percent of the
quarter hour being worked. For the purpose of this provision, eight (8)
minutes shall constitute fifty (50%) percent of the quarter hour. This will
apply to all quarter hours including the first quarter hour.
D. Employees entitled to overtime pay for work performed under
two or more provisions of this Agreement shall receive the highest rate
provided for such hours of work, but overtime shall not be compounded or paid
twice for the same hours worked, and in no case shall overtime be pyramided
upon overtime.
ARTICLE VI
WAGES & COMPENSATION
Section 1 -- Schedule of Wages: During the term of this Agreement,
starting annual salary for employees hired after October 1, 1997, covered by
this Agreement shall be as follows:
A. Classification Entry Level
-------------- -----------
Production Assistant, Directors $14,000
Maintenance Technician $14,000
Photojournalist, Videographer $15,000
Anchor/Reporter $15,000
Master Control/Audio Tape $13,500
6
<PAGE> 7
The above minimum salaries are to be prorated on an hourly
basis for determination of overtime rates, etc.
Nothing in this Agreement shall prevent the Employer and new
employee from agreeing to a higher entry level wage. Any increases thereafter
acquired by virtue of the terms of this Agreement shall be added to the higher
entry level wages so agreed upon.
B. Full-time employees hired prior to October 1, 1997, who have
completed their probationary period shall have their individual annual base
wage rates increased by $100.00 and thereafter receive the following increases
to their pre-existing base wages:
<TABLE>
<S> <C> <C>
Effective 10/1/1997 if earning less than $10.00/hr. . . . . . . .7%
if earning is greater than $10.00/hr.
but less than $12.00/hr. . . . . . . . . .4%
if earning more than $12.00/hr . . . . . . .3%
Effective 10/1/1998 if earning less than $10.00/hr. . . . . . .7%
if earning is greater than $10.00/hr.
but less than $12.00/hr. . . . . . . . . .4%
if earning more than $12.00/hr . . . . . . .3%
</TABLE>
Effective 10/1/1999 three (3%) percent
Effective 10/1/2000 three (3%) percent
Effective 10/1/2001 three (3%) percent
C. Part-time employees hired prior to October 1, 1997, shall
receive the following increases to their pre-existing hourly rates:
Effective 10/1/1997 three (3%) percent
Effective 10/1/1998 three (3%) percent
Effective 10/1/1999 three (3%) percent
Effective 10/1/2000 three (3%) percent
Effective 10/1/2001 three (3%) percent
If a part-time employee was earning less than Six Dollars and Fifty
Cents ($6.50) per hour at the commencement of this Agreement, his or her hourly
rate shall be increased to $6.50 and thereafter, further increased by three
(3%) percent to reflect the 10/1/97 adjustment noted above.
D. New part-time employees hired after October 1, 1997, shall
receive the following rate for hours worked during their first year of
employment: Six Dollars and Fifty Cents ($6.50) per hour. Thereafter, after
completion of each full year of employment, such part-time employee shall
receive an increase of three (3%) percent for each successive full year of
employment completed.
7
<PAGE> 8
Section 2 -- Contract Signing Bonus: In addition to other forms of
compensation and adjustments to be received under this Agreement, employees in
the following wage ranges shall receive, within fifteen (15) days of the
commencement of this Agreement, a one-time bonus which shall not be added to
such employee's base wages as follows:
Wage Rate on September 30, 1997 Bonus
------------------------------- -----
if less than $8.00/hr. $500
if greater than $8.00/hr. but $250
less than $10.00/hr.
if part-time employee $100
Section 3 -- Travel: Any time spent traveling to locations other than
the employee's normal reporting place shall be paid for in the manner of any
other time worked. When called in on an emergency basis, employees shall be
compensated at the applicable hourly rate starting at the time of notification
and concluding upon their return home.
Section 4 -- Employee Vehicles: Employees required to use their
personal vehicles in the execution of Company business shall be reimbursed at
the Internal Revenue Code rate per mile, plus all tolls and parking fees.
Employees must have a valid state driver license and the state's minimum
required insurance. Employees agree to abide by the same rules for the
operation of station-owned vehicles as outlined in the employee handbook.
The Employer shall provide travel-accident insurance for all employees
traveling on Company business.
Section 5 -- Meal and Lodging Allowance: Upon submission of
appropriate documentation, pursuant to IRS requirements, the Company shall
reimburse or advance employees for all meal and lodging expenses incurred or to
be incurred by employees who are required to perform services outside of the
City of Johnstown. Prior approval of the Employer is required for allowances
under this section.
ARTICLE VII
HOLIDAYS
Section 1 -- Holidays: Employees covered by this Agreement shall
receive the same paid holidays as provided nonbargaining unit employees
pursuant to the employee handbook. These include three (3) fixed holidays (New
Year's Day; Thanksgiving Day; Christmas Day) plus six (6) personal holidays as
noted below. If the Employer so requires, the employee shall work on such
holiday(s).
Section 2 -- Fixed Holiday Pay: Where any of the fixed holidays fall
on a full-time employee's day off, during a vacation or while on an ordered
military leave for reserve duty, and are not worked, the holiday allowance
shall be paid.
8
<PAGE> 9
Section 3 -- Work on Fixed Holidays:
A. An employee required to work on a fixed holiday falling on
his/her scheduled day off shall be paid at the rate of one and one-half (1 1/2)
times his/her straight time rate for the work so performed, plus a holiday
allowance for all such hours worked at his/her straight time rate of pay.
B. An employee required to work on a fixed holiday falling on
his/her regular scheduled workday shall be paid at time and one-half (1 1/2)
his/her straight time rate for work so performed, plus a holiday allowance for
all such hours worked at his/her straight time rate of pay.
C. Where any of the fixed holidays are not required to be worked,
the holiday allowances of eight (8) hours at the straight time rate is to be
paid only to those actively employed during the week in which a holiday occurs.
If the fixed holiday falls within an employee's vacation period, he/she shall be
compensated by an extra day's vacation, or receive an extra day's pay, at the
option of the Employer.
Section 4 -- Personal Holidays: Employees shall receive six (6) paid
personal holidays during each calendar year. A personal holiday schedule shall
be made available for employee choices at the beginning of each year and
employees shall select proposed days for such use. In the event that selected
days are contrary to the operational needs of the station, seniority shall
prevail. In utilizing the six personal holidays, at least two (2) days must be
taken in each of the first and second quarters of the calendar year. The
employee's remaining personal holidays can be utilized at any time during the
remainder of the calendar year.
Section 5 -- Eligibility: To be eligible for holiday pay, an employee
must have worked, unless specifically excused by the Employer, his or her last
scheduled work day immediately preceding and immediately following the holiday.
ARTICLE VIII
VACATIONS
Section 1 -- Vacation Entitlement: Vacation pay for full-time
employees shall be in the amount of the employee's straight time earnings for
forty (40) hours for each week of vacation accrued. Vacation entitlement is
based upon the calendar year. Eligible employees earn vacation as follows:
Less than five years of service at January 1 of each year: two weeks; Five
years of service or more at January 1 of each year: three weeks. Employees will
earn vacation entitlement in the year of hire at the rate of five (5) hours a
month.
Section 2 -- Vacation Preferences: To the extent possible, preferences
in the choice of vacations shall be given on a seniority basis. A sign-up sheet
for vacation requests shall be posted prior to the commencement of the vacation
year. The vacation year will be from
9
<PAGE> 10
January 1 through December 31. Vacations shall be taken during the year in which
they are earned.
Section 3 -- Vacation Relief: In the event it is necessary to retain
vacation relief personnel, the Employer may do so and such relief employees
need not be employed under the terms and conditions of this Agreement, unless
they work in excess of forty (40) days in a year.
Section 4 -- Vacation Pay at Termination: As long as an employee
provides at least two (2) weeks' advance notice of resignation in writing, he
or she shall be entitled to receive pay at termination for accrued but unused
vacation leave for that year. Similarly, if an employee has utilized more
vacation days at the time of separation than he or she has earned for the
calendar year, the Employer is authorized to deduct an amount representing such
overage from the employee's final paycheck.
Section 5 -- Payment of Accrued Vacation Leave: With the January 22,
1998 payroll, all earned and unused vacation time as of December 31, 1997, will
be paid to all employees.
Section 6 -- No Carryover of Unused Leave: Vacations cannot be
accumulated and must be taken during the calendar year and, unless such nonuse
is caused by the Employer's need to reschedule the employee to be present, will
be forfeited at year end. Payment will not be made in lieu of time not taken.
There will be no compensatory time off for an illness or accident which occurs
after an employee has started a regularly scheduled vacation.
Employees may utilize up to one week's vacation entitlement for single
day or combinations of days vacation leave. All remaining entitlements must be
taken in weekly units.
ARTICLE IX
SENIORITY
Section 1 -- Definition of Seniority: For the purposes of this
Agreement, seniority shall be computed using prior continuous, uninterrupted
full-time employment with the Employer.
Section 2 -- Seniority Roster: The Employer shall maintain a roster of
bargaining unit employees establishing the name, position and date of hire
which shall be available for examination by such employees.
Section 3 -- Loss of Seniority: Seniority and status as an employee
shall be lost in the following manner:
a) By voluntarily quitting.
b) Failure to report after expiration of leave of
absence.
c) Failure to report to work after a layoff within
three (3) working days of receipt or seven (7)
calendar days after mailing, whichever is
later, of a certified letter containing proper
notification recall by the Station, mailed
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<PAGE> 11
to employee's last known address. A simultaneous
copy will be given to the Union.
d) Discharge.
e) Layoff for a period equal to two years.
f) An employee is absent three (3) consecutive
work days without notification to the Station, unless
justifiable reasons can be afforded.
g) An employee is determined to have falsified his/her
application for employment, or other Station records.
h) Except as otherwise provided in the contract,
failure to perform any bargaining unit work for the
Station for one year.
ARTICLE X
LEAVES OF ABSENCE
Section 1 -- Sick Leave: All full-time employees shall receive paid
sick leave each year to be calculated on the basis of eighty (80) hours per
year (January 1 through December 31) and shall be able to accumulate up to a
maximum of eighty (80) hours of unused leave for use in the next year. During
the period from October 1, 1997, through December 31, 1997, employees shall
receive twenty (20) hours sick leave (pro-rated). Newly hired full-time
employees shall receive a pro-rated number of sick days during the first
calendar year of employment.
The Employer reserves the right to require a doctor's certificate or
other acceptable proof of illness for any suspected abuse of sick leave used.
Section 2 -- Bereavement Leave: In the event of a death in the
employee's immediate family, namely: parents, siblings, children, spouse,
grandparents, grandchildren, mother or father-in-law, son- or daughter-in-law,
he/she shall receive paid leave in order to attend services, in accordance with
the schedule for bereavement leave provided to nonbargaining unit employees as
per the employee handbook.
Section 3 -- Jury Duty: Employees shall receive jury duty pay in
accordance with the schedule for jury duty pay provided to nonbargaining unit
employees as per the employee handbook.
Section 4 -- Family and/or Medical Leaves of Absence: Employees shall
have the right to take unpaid leaves of absence in accordance with the
Employer's policy relative to the Family and Medical Leave Act (FMLA) as
provided to nonbargaining unit employees as per the employee handbook. During
such leaves, the employee's seniority, vacation and holiday accrual, and
accrual of all other benefits, shall be frozen until he/she returns to work.
Section 5 -- Military Leaves: Employees shall have the right to take
military leave in accordance with the provisions for military leaves provided
to nonbargaining unit employees as per the employee handbook.
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Section 6 -- Union Leaves: The Union may designate an employee who
shall be granted a reasonable short-term unpaid leave of absence for the
purpose of attending to Union business, subject to the operational needs of the
Station.
Section 7 -- Other Personal Leave: Should urgent circumstances arise,
employees may request an unpaid leave for personal reasons. All earned vacation
time must be taken before any leave begins. Personal leaves are limited to a
maximum of thirty (30) days after the full use of vacation time.
Section 8 -- Child Bearing Leave: Employees shall have the right to
take maternity leave in accordance with the provisions for maternity leave
provided to nonbargaining unit employees as per the employee handbook.
ARTICLE XI
FRINGE BENEFITS
Section 1 -- Health, Dental and Vision Coverages: During the term of
this Agreement, full-time employees and their dependents shall receive health,
dental and vision benefits in accordance with the Employer's plans in effect as
of the execution of this Agreement. The Employer shall bear the entire cost of
the monthly premium for the employee coverage.
If an employee chooses dependent coverage, his or her contribution to
the cost of such dependent coverage premium shall be as follows: Eligible
Employees hired prior to the commencement of this Agreement -- Eleven Dollars
and Fifty Cents ($11.50) per pay period and one hundred (100%) percent of any
premium cost increased subsequent to February 28, 1998; For employees hired
after the commencement of this Agreement: fifty (50%) percent of dependent
costs at time of hire plus one-hundred (100%) percent of any premium cost
increased thereafter.
The Union's designated Committee shall have the right to review the
Plan after each year and make suggestions, where appropriate, relative to the
Plan.
Section 2 -- 401(k) Benefits: Employees covered by this Agreement
shall be eligible to participate in the Employer's 401(k) savings plan at the
same rate and benefit levels provided to nonbargaining unit employees. All
administrative costs and expenses associated with the Plan shall be borne by the
Employer and no charges for same shall be made against participating employee
accounts.
Section 3 -- Life Insurance: During the term of this Agreement, all
full-time employees shall receive, at no cost to the employee, life insurance
coverage in accordance with the Employer's plan in effect as of the execution of
this Agreement. Such plan shall provide a death benefit in the amount of one
and one-half (1 1/2) the individual employee's salary.
Section 4 -- Long and Short Term Disability Insurance: During the term
of this Agreement, the Employer shall provide, at no cost to the employee, long
and short term
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<PAGE> 13
disability insurance coverage for each full time employee. Such maintenance
coverages shall be in accordance with the Employer's disability insurance plans
afforded to nonbargaining unit employees at the station.
Section 5 -- Long Term Care Plan: During the term of this Agreement,
the Employer shall provide, at no cost to the employee, the benefits of the
long term care coverage plan, for each full time employee. Such coverage shall
be in accordance with the Employer's coverage plans afforded to nonbargaining
unit employees at the station.
Section 6 -- Travel Accident Benefit Plan: During the term of this
Agreement, the Employer shall provide, at no cost to the employee, the benefits
of the travel accident benefit plan for each full-time employee. Such coverage
shall be in accordance with the Employer's coverage plans afforded to
nonbargaining unit employees at the station.
ARTICLE XII
SEVERANCE
Section 1 -- Layoff: Layoffs and rehiring following layoffs shall be
in accordance with seniority within the bargaining unit, provided that the
senior employee or employees shall have, in the judgment of the Employer, the
necessary qualifications, experience and ability to perform the available work,
and shall require a minimum of two (2) weeks' written notice to the Union and
the employee or two (2) weeks' salary in lieu thereof.
Section 2 -- Severance Pay: Any employee who is laid off for any
reason other than just and sufficient cause shall be entitled to severance
payments as noted herein, in addition to any accrued vacation leave.
Continuous Service Severance Pay
------------------ -------------
Less than six months None
After six months and up to two years One Week
After two years and thereafter One week per year of service
up to thirteen (13) weeks
The amount of severance shall be in addition to any pay in lieu of
notice entitled under Section 1 of this Article.
Severance pay is not payable upon a voluntary resignation, change from
full-time to part-time status of employment, disability, retirement or in
connection with the sale of the business or Station if the employee is offered
a comparable position by the Purchaser.
Section 3 -- Layoffs Resulting from Automation or Technology:
Whenever any layoff results from the introduction of any process, equipment or
device not now in use and within Union jurisdiction, the employee to be laid
off will be given at least two (2) months' notice in advance of the effective
date of the layoff or two (2) months' pay in lieu thereof.
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Section 4 -- Rehire After Layoff Exceeding Two Years: An employee who
is rehired after a layoff extending beyond two (2) years shall re-enter the
employ of the Employer for all purposes as a new employee.
Section 5 -- Credit of Severance Pay: If an employee who has received
severance pay is rehired, the period for which he/she has received such
severance pay shall be excluded in determining any entitlement to severance pay
upon his/her subsequent layoff.
ARTICLE XIII
PROBATIONARY EMPLOYEES
Trial Employment for New Employees: Any new employee shall be
considered to be on probationary, trial employment for a period of three (3)
months. The Employer may extend the trial employment period an additional
three (3) months. During the three (3) month trial employment period, or the
three (3) month extension of the trial employment period, the Employer may
discharge or discipline such employee at any time, with or without just cause.
Employees on trial employment will not be entitled to welfare
benefits, as outlined in Article XI, until they have successfully completed
their trial employment, with the exception of Group Health Insurance coverage.
Trial employment employees are also entitled to receive holiday benefits as
outlined in Article VII for any holiday occurring during their trial
employment.
During this period, such employees may be discharged for any reason
and shall not be entitled to the provisions of Article III of this Agreement.
Successful completion of the trial employment shall not be considered as an
offer, by the Employer, of any employment contract except as otherwise provided
herein.
ARTICLE XIV
GRIEVANCE PROCEDURE
Section 1 -- Grievances: In the event any difference arises between
the Employer and the Union, or any of the employees of the Employer, as to the
meaning and application of or compliance with the express provisions of this
Agreement, such differences shall be settled in the following manner:
Section 2 -- Step 1: The grievance or dispute shall be reduced to
writing within five (5) days after it arises or within five (5) days after the
employee or the Union knew, or should have known, of such dispute or grievance.
The aggrieved party shall serve a copy thereof upon the other party to this
Agreement.
Section 3 -- Step 2: The Shop Steward and the Supervisor shall meet
and confer as promptly as possible. If not settled satisfactorily within three
(3) working days, a written
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<PAGE> 15
response will be given to the grievant and concerned parties in Step 3 within
ten (10) working days from the meeting.
Section 4 -- Step 3: The Shop Steward, Business Representative of the
Union and the General Manager of the Station shall meet and confer as promptly
as possible. If not settled satisfactorily within three (3) working days, the
parties shall proceed to the next step.
Section 5 -- Step 4: The grievance may be presented to the designated
Vice-President and Treasurer of the Employer. If not satisfactorily settled
within fifteen (15) working days after submission in the case of a disputed
discharge, or within thirty (30) days in the case of other disputes, either
party may request arbitration.
Section 6 -- Arbitration: Notice of intent to arbitrate must be given
in writing to the other party within ten (10) days after Step 4. Arbitration
shall be in accordance with the rules and regulations of the American
Arbitration Association. The expense of the arbitrator shall be shared equally
by the parties hereto.
Section 7 -- Arbitration Awards: The arbitrator shall not have
authority to add to, subtract from, change or modify any provision of this
Agreement, but shall interpret the existing provisions of the Agreement and
apply them to the specific facts of the grievance, controversy, or dispute.
The decision of the arbitrator shall be final and binding on the parties.
Section 8 -- Waivers: The failure to follow the procedures and steps
outlined, or the failure to follow the time limits within which certain acts
may be done, or the expiration of any such time limits, shall be an absolute
bar to further processing of grievances or the arbitration thereof. Waivers of
any such procedures or time limits must be in writing and signed by the
parties. If the Employer fails to respond by the time limits herein, the Union
shall have the right to process the grievance to the next step of the
procedure, as if the Employer has complied with the time limits.
Section 9 -- Preservation of Rights: Nothing contained herein shall
prevent an employee from exercising his/her rights under Section 9(a) of the
Labor-Management Relations Act of 1947, as amended. Only the Union may process
the grievance through arbitration.
Section 10 -- Multiple Grievances: Not more than one (1) grievance may
be submitted to the same arbitrator unless the Employer consents thereto. The
Union business representative shall have the authority to withdraw or settle
any grievance prior to the decision or award of the arbitrator.
Section 11 -- Limitations on Authority: The authority of the
arbitrator shall be limited as follows:
A. In considering whether a matter is subject to arbitration as a
matter of right, and in considering the case on its merit and interpreting and
applying the provisions of this Agreement, it is mandatory that the arbitrator
shall be guided by the fundamental principle that the Employer retains all
rights to manage its business, including, but not limited thereto, those
15
<PAGE> 16
specifically retained in this contract, unless expressly modified or restricted
by a specific provision of this contract.
B. The decision and award of the arbitrator shall not be made
retroactive to a date more than twenty-one (21) days prior to the date notice
of grievance was first served.
C. In any proceedings seeking to require or stay arbitration or
to stay, enforce, modify, or set aside a decision or award of the arbitrator,
none of the provisions of this contract shall deprive a court of its power to
determine questions or arbitrability, or the jurisdiction of an arbitrator or
the validity of any decision or award of the arbitrator.
ARTICLE XV
MINIMUM COMPLEMENT
During the term of this Agreement, the Station will employ a minimum
complement of thirty (30) full-time employees for this bargaining unit.
ARTICLE XVI
MANAGEMENT RIGHTS
Section 1 -- Management Rights: Except as expressly abridged by a
specific provision of this Agreement, the Station reserves and retains
exclusively all of its normal and inherent rights with respect to the
management of its business, including but not limited:
o to the right to determine and from time to time, to
re-determine, the number, location and types of its
stations' facilities and operations;
o to select and direct the working forces in accordance
with the requirements determined by management;
o to establish and change work schedules and
assignments;
o to lay off, terminate or otherwise relieve employees
from duty for lack of work or other legitimate reason;
o to make and enforce reasonable rules for the
maintenance of discipline;
o to suspend, discharge, or otherwise discipline
employees;
o to determine the means, methods and processes of
work;
o to alter, rearrange, change, extend, curtail or
discontinue its operations, partially or completely;
o to determine the size and assignment of the work
force;
o to determine the equipment to be used, and the
number and kind of programs to be produced or
aired or services to be rendered;
o and otherwise to take such measures as management may
determine to be necessary to the orderly, efficient,
and economical operation of the business.
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Any of the rights, powers, authority, and functions the Station had
prior to the negotiations of this Agreement are retained by the Station, except
as expressly abridged by a specific provision of this Agreement. The Station's
not exercising rights, powers, authority, and functions reserved to it, or its
exercising them in a particular way, shall not be deemed a waiver of said
rights, powers, authority, or functions, or of its right to exercise them in
some way not in direct violation of a specific provision of this Agreement.
Section 2 -- Rules and Regulations: The Station shall have the right
to establish, enforce, amend, and maintain reasonable rules of employee
conduct, which, when published or posted, shall be observed.
Section 3 -- Complete Agreement: The parties agree that in
interpreting the terms of this Agreement, the Employer shall not be bound to
any claims of "past practice" which may have existed under the ownership and
operation of WJAC-TV, by prior owners before the commencement of this
Agreement.
ARTICLE XVII
NO STRIKE/LOCKOUT
During the term of this Agreement, there shall be no general, partial
or sympathy strikes, picketing, boycotts, work stoppages, slow-downs, or
concerted interruptions or delays of work, or any other interruption of the
Station's normal operations or similar activity. Neither the Union nor any of
its officers, representatives, agents, or employees shall authorize, assist,
support, cause or participate in, any activities described in the above
paragraph. Nor shall any member assist, support, cause or participate in any
such activities.
The Union agrees that it shall immediately make every reasonable
effort to terminate any activity in violation of this clause.
The Station shall likewise not lock out employees during the term of
this Agreement.
ARTICLE XVIII
TERM OF AGREEMENT
Section 1 -- Term: This Agreement shall take effect as of October 1,
1997, and remain in effect up to and including September 30, 2002, unless
changed or terminated in the manner hereinafter provided, and it shall be
automatically renewed and remain in effect from year to year thereafter.
Section 2 -- Notice to Bargain: Either party desiring to modify the
terms of this Agreement must notify the other in writing at least sixty (60)
days prior to its expiration. Whenever such notice is given, the proposals of
the parties shall be exchanged within a reasonable period thereafter, and the
parties shall enter into negotiations.
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<PAGE> 18
ARTICLE XIX
MISCELLANEOUS
Section 1 -- Certain Transmitter Maintenance and Repairs: In no event
shall any qualified technician be required or permitted to perform any duties
inside the interlocked transmitter enclosures unless another qualified employee
technician or engineer is also present.
Section 2 -- Successors and Assigns: This Agreement shall be binding
upon the parties hereto and their successors and assigns.
Section 3 -- Severability: Should any of the provisions of this
Agreement become unlawful by virtue of any Federal or State law, such provision
shall be modified to comply with such law, but in all other respects, the
provisions of this Agreement shall continue in full force and effect.
Section 4 -- Waiver of Rights: No employee shall have the right to
waive any of the provisions of this Agreement without the written consent of
the Union.
IN WITNESS WHEREOF, the Employer and the Union have hereunto set their
hands, the day and year above written:
International Alliance of Theatrical Stage WJAC-TV
Employees, Moving Picture Technicians,
Artists and Allied Crafts of the
United States of America, TBSE, Local 902
By: /s/ Jody L. Vavrek By: /s/ Martin Ostrow
---------------------------- ----------------------
/s/ Robert C. Rigo
----------------------------
/s/ John A. Foster
----------------------------
By: /s/ Thomas J. Kiousis, Jr.
----------------------------
International Representative
-----------------------------
Thomas J. Kiousis, Jr.
International Representative
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<PAGE> 1
Exhibit 10.37
LOCAL 246
INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS
AND
SMITH ACQUISITION CORP. - WTOV-TV
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
SECTION I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Scope of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3. Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4. Union Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5. Check-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6. Union Discipline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7. Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8. No Strike - No Lockout . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9. Probationary Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10. Temporary Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.11. Part-Time Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.12. Equal Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.13 Transfer of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1. Grievance and Arbitration Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2. Investigation of Grievance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1. Hours of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2. Workweek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3. Work Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4. Minimum Shift for Employees Scheduled to Work . . . . . . . . . . . . . . . . . . . . . . 11
3.5. Rest Period Between Shifts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6.A. Preparation Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6.B. Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.7. Travel Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.8. Overtime and Premium Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9. Travel Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.10. Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.11. Shift Differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.12. Payday . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.13. Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.14. Vacations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.15. Sick Leave and Funeral Leave . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.16. Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.17. Group Life, Hospitalization, Major Medical and Dental Insurance . . . . . . . . . . . . . 19
3.18. Bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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<TABLE>
<S> <C> <C> <C>
4.1. Hazardous Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2. Tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3. Clean and Safe Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.1 Leave of Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2 Layoffs and Preferential Re-Hire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3 Discharges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4 Military Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 Management of the Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.6 Total Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
ii
<PAGE> 4
AGREEMENT
This Agreement entered into as of this 1st day of December, 1997, by
and between Smith Acquisition Corp., owner and operator of WTOV-TV,
Steubenville, Ohio/Wheeling, West Virginia (hereinafter referred to as the
"Company"), and Local Union No. 246 of the International Brotherhood Of
Electrical Workers (hereinafter referred to as the "Union"), bargaining
representative for the Engineers, Switchers-Directors, Projectionist-Audio,
Floormen, Cameramen, Film Editors, Associate Film Editors, Property Managers,
and Artists (hereinafter referred to as "Technicians" or "Employees"), employed
by the Company at Station WTOV-TV during the term of this Agreement.
BASIC PRINCIPLES
The general purpose of this Agreement is to set forth the hours of
work, rates of pay, and conditions to be observed by the Company and the Union;
and to provide orderly and harmonious procedures between the Company and the
Union; and to secure a prompt and fair disposition of grievances.
In consideration of the covenants and agreements contained herein, it
is agreed as follows:
<PAGE> 5
SECTION I
The general purpose of this Agreement is to set forth the hours of
work, rates of pay, and conditions to be observed by the Company and the Union;
and to provide orderly and harmonious procedures between the Company and the
Union; and to secure a prompt and fair disposition of grievances.
In consideration of the covenants and agreements contained herein, it
is agreed as follows:
1.1. Duration - This Agreement shall take effect the 1st day of
December, 1997, and shall remain in effect through November 30, 2000.
1.2. Scope of Work - The work covered by this Agreement to be
performed only by Technicians, shall include all work in connection with the
installation (except the installation of conduit and alternating current wiring
therein, the wiring of light circuits and the wiring of power circuits up to
the final distribution panel), operation, maintenance and repair of television
broadcast, facsimile and audio equipment and apparatus by means of which
electricity is applied in the transmission or transference production or
reproduction of voice, sound or vision with or without ethereal aid, including
all types of recordings, editing and splicing of film and tape and all work of
the manner and kind now performed by the present bargaining unit on equipment
owned, operated, leased or rented from other parties by the Company. Excluded
will be the equipment and apparatus used in the Wheeling West Virginia
satellite news studio, the teleprompter, all portable audio tape recorders, all
silent or sound film and tape equipment and film and tape editing equipment
used in news reporting, sports coverage, public affairs, and documentary
2
<PAGE> 6
programs. Provided that bargaining unit employees may be assigned to operate
the Teleprompter so long as they are not required to simultaneously perform
other work, and so long as other personnel normally assigned to the
Teleprompter are not at work.
Notwithstanding anything to the contrary contained in this
Agreement, the operations manager, the assistant operations manager, the
creative services director, the chief engineer, and the assistant chief
engineer shall be permitted to perform bargaining unit work which is incidental
to their jobs, provided that such work may not exceed twenty percent (20%) of
their work time; and provided further that supervisors will not be scheduled in
advance to perform on air work.
1.3. Recognition - The Company recognizes the right of its
employees to organize and to bargain collectively through representatives of
their own choosing. Local Union No. 246 of the International Brotherhood of
Electrical Workers is hereby recognized as the collective bargaining
representative of the employees.
1.4. Union Security - It is a condition of employment that all
present employees in the bargaining unit who are tendering uniform initiation
fees and the payment of periodic dues shall continue to do so during the term
of this Agreement or any extension thereof. All employees who are hired into
the bargaining unit on or after the effective date of this Agreement shall take
such steps as are necessary to tender uniform initiation fees and periodic
payment of dues effective on or after the thirty-first (31st) day following the
beginning of such employment or the effective date of this Agreement,
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whichever is later. The Union may request that, the Employer discharge an
employee who fails to discharge such obligations. In the event the Employer
complies with such request, the Union shall indemnify, defend and save the
Employer harmless against any and all claims, demands, suits or other forms of
liability that may arise out of or by reason of action taken by the Employer in
relation to the obligations of this section.
1.5. Check-Off - The Company agrees to deduct from wages of
employees membership dues in the Union, provided the Company receives from each
employee on whose account such deductions are to be made, an individually
signed check-off authorization card. Such check-off authorization cards may
be irrevocable during the balance of the term of this Agreement or for one (1)
year after the date on the card, whichever occurs sooner, and shall be
irrevocable for a successive period of one (1) year or successive terms of
collective agreements between the Company and the Union, provided they are not
revoked within the specified period set forth in the authorization card. The
Company and the Union have agreed upon a form of check-off authorization card
which is attached hereto as Exhibit "A", and which, by reference, is made a
part of this Agreement. Such deductions shall be made from wages payable on
the first (lst) day each month following the date such membership dues become
payable, and the Company shall promptly remit the same to the Treasurer of the
Union.
1.6. Union Discipline - The Union reserves the right to discipline
its members for violation of its laws, rules and regulations, not contrary to
the provisions of this Agreement.
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<PAGE> 8
1.7. Representation - The Union and the Company agree to meet and
confer through representatives at reasonable times on any and all questions or
matters relating to the terms of this Agreement. Should any employee, acting
in an official capacity as a representative of the Union, confer with the
Company at reasonable times for reasonable periods during regular working
hours, he may do so if it becomes necessary, providing he makes provisions with
another qualified employee to replace him, without cost to the Company.
1.8. No Strike - No Lockout - The Union and members of the
bargaining unit agree that there will be no strikes, slowdowns, concerted
refusals to work over-time or work stoppages of any kind including, but not
limited to, refusals to cross picket lines established at the Employer's
premises, and the Company agrees that it will not engage in a lockout during
the term of this Agreement, whether or not the underlying dispute between the
parties can be resolved under the grievance and arbitration procedures provided
in this Agreement. The Union further agrees that it will take every reasonable
means which is within its powers to induce employees engaged in a strike or
work stoppage in violation of this Agreement to return to work. All questions,
disputes, or controversies as to the interpretation, application and/or
performance under the terms of this Agreement shall be settled and determined
solely and exclusively by the grievance and arbitration procedures provided in
this Agreement.
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1.9. Probationary Period - A new employee shall be on probation for
the first one hundred eighty (180) days of his employment unless the new
employee has had at least one (1) year of documented experience by a previous
employer in television work, then his probationary period shall be ninety (90)
days. If the Company finds, after a trial, such probationary employee is not
qualified for the position, the Company may, during such probationary period,
terminate the employment of such employee and such termination shall not be
subject to the grievance procedure. An employee in the employ of the Company
beyond the applicable probationary period shall be considered employed on a
regular basis.
1.10. Temporary Employees - Temporary employees will be employees
who are employed to cover for the vacations, long-term illnesses and leaves of
bargaining unit employees. Temporary employees are not covered by this
Agreement and are not eligible for the benefits hereunder. They may be laid
off, disciplined, or discharged as determined by the Company and their layoff,
discipline, or discharge shall not be subject to the grievance procedure.
Temporary employees continued in the service of the Company subsequent to their
temporary employment shall receive credit for such service. Any such temporary
employee whose employment is continued beyond 180 days shall be covered by this
Agreement and shall be deemed to have completed his probationary
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<PAGE> 10
period. A disruption in service of less than 90 days of such a temporary
employee's employment shall not work a forfeiture of his time served immediately
prior to such disruption. At the commencement of any such temporary employment,
the Company shall notify the Union of such employee's status.
1.11. Part-Time Employees - Part-time employees are employees who
regularly work less than a forty (40) hour week and not less than four (4)
hours on any day. They earn seniority credit of one (1) week for each forty
(40) hours worked. They will be given preference in filling full-time
vacancies on the basis of seniority if qualified. Their probation period shall
be one hundred eighty (180) days. Part-time employees are subject to all
provisions of this Agreement except workweek, workday, and schedules. A
part-time employee who is regularly scheduled to work thirty-two (32) or more
hours per week shall have the option of obtaining the Group Life and
Hospitalization coverage provided for under Section 3.17 of this Agreement, on
the same basis as full-time employees. A part-time employee who has completed
six (6) months of service and who has worked eighty-eight (88) hours or more per
month during any three of the four preceding months, but who is regularly
scheduled to work less than thirty-two (32) hours per week shall have the option
of obtaining for himself or herself alone the Group Life and Hospitalization
coverage provided for under Section 3.17 of this Agreement, at the cost to the
part-time employee of one-half (1/2) of the cost to the Company of providing
such insurance. Such part-time employees shall not be permitted to
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<PAGE> 11
enroll their dependents in such insurance plans. The number of part-time
employees actively employed cannot exceed 25% of the number of full-time
employees actively employed. Part-time employees will be laid off first should
layoffs become necessary, provided qualified full-time employees are
immediately available to perform the work required. A temporary decline in
full-time employees, such as because of a resignation, absence or termination,
will not require an immediate part-time termination.
1.12. Equal Opportunity - The purpose of the parties is for equal
opportunity for all employees in that employment, promotion, demotion,
transfer, layoff, recall and disciplinary action will be applied without regard
to race, creed, color, age, sex, national origin or any other factor prohibited
by law, and the parties will administer the provisions of this Agreement without
unlawful discrimination. Whenever a male or female noun or pronoun is used in
this Agreement, it shall be deemed to apply equally to both sexes.
1.13. Transfer of Ownership - The Company warrants that it operates
television station WTOV-TV. The parties agree that if the Company should
transfer or assign the operation of the station to any third party or parties
during the term of this Agreement as a result of any action of any governmental
agency immediately affecting the Company's operation of WTOV-TV or because of
involuntary transfer or assignment, the Company need not require the transferee
or assignee to assume the obligations of this Agreement, and if the transferee
does not assume such obligations the Union and its members shall be free of all
obligations hereunder; but all other cases of transfer or
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assignment of WTOV-TV shall require the transferee or assignee to assume, for
the benefit of the Union and its members, the obligations of this Agreement, and
the Company shall be required to pay employees for any vacation earned, but not
taken under this Agreement, and any other compensation due.
SECTION 2
2.1. Grievance and Arbitration Procedure - Any grievance which
arises out of a dispute as to the application of this Agreement shall be
settled promptly and without any interruption or suspension of work in
accordance with the following procedure:
A. Any employee having a grievance may first refer the
complaint to his shop steward or immediate supervisor for oral discussion of
the problem involved. The supervisor shall be required to render an oral
decision on the grievance within twenty-four (24) hours following the
presentation of the grievance.
B. In the event the supervisor fails to decide the
matter within twenty-four (24) hours or should his decision be unsatisfactory
to the grieved employee, the grievance shall then be reduced to writing, filed
by the grieved employee and referred to the Union representative who in turn
shall submit the written grievance to the Operations Manager or Chief Engineer
or their designee.
C. Management or their representatives shall answer said
grievance in writing within seventy-two (72) hours, unless it is mutually
agreed between the parties to extend the time.
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D. If after exhausting the foregoing procedure, the
grievance remains unsettled, the business agent of the Union or his
representative and a representative of the Company shall meet with the grieved
employee and his representative at a conference wherein an effort shall be made
to amicably dispose of the grievance.
E.1. In the event any dispute between the Company and the
Union or any of the employees in the bargaining unit shall not have been
satisfactorily settled by the above procedure, the matter shall be submitted
for arbitration to a suitable disinterested person as impartial arbitrator who
shall be appointed by the American Arbitration Association upon written
application by the parties. The impartial arbitrator shall interpret and apply
this Agreement, but he shall not have authority to alter or modify the terms of
this Agreement. The decision of the impartial arbitrator shall be in writing
and final and binding on the Company, the Union and the employees involved.
Each party shall bear the expense of its own representatives at the arbitration
hearing, and the other expenses, including that for the impartial arbitrator,
shall be divided equally and paid one-half (1/2) by the Company and one-half
(1/2) by the Union.
2. The grievance procedure may be utilized by the
Company in processing Company grievances. In processing such grievances the
Union shall observe the specified time limits in answering.
3. All grievances under this Agreement must be taken up
within one (1) week after knowledge of the alleged error is available to the
party bringing the grievance. Where no time is otherwise
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specified for a step to be taken, then such action shall be required to be taken
within one week, provided that a week's extension shall automatically be granted
so long as it is requested before the end of the time limit.
2.2. Investigation of Grievance - An authorized representative of
the Union shall be allowed access to WTOV-TV television station where members
of the Union are employed under this Agreement to inspect or investigate
television operations of the Company for compliance with terms and conditions
herein, provided he receives prior permission from the supervisor in charge and
further provided, there is no interruption of or interference with routine
operations.
SECTION 3
3.1. Hours of Work -
A. Normal hours per week shall be forty (40) hours of
work.
B. Normal hours per day shall be eight (8) continuous
hours per turn, excluding lunch period.
3.2. Workweek - The workweek shall commence for each employee at
the beginning of his workday on Monday or his first workday thereafter and run
to the end of the tour of duty commenced on the fifth (5th) day of work.
Subject to Section 3.01, this Article shall not be construed to be a guarantee
of hours of work per day or per week. Determination of daily and weekly work
schedules shall be made by the Company and such schedules may be changed by the
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Company from time to time to suit varying conditions of business; provided that
changes deemed necessary by the Company shall be made known to the Union Shop
Steward in advance whenever the circumstances permit. Changes may be made at
any time due to circumstances beyond the control of management, or when due to
another employee's absence.
3.3. Work Schedules - Schedules showing employees' workdays shall
be made known to employees in accordance with prevailing practices but not
later than 5:00 P.M., nine (9) days prior to the start of the calendar week in
which the schedule becomes effective. Changes may be made at any time due to
circumstances beyond the control of management, or when due to another
employee's absence. However, all other changes must have forty-eight (48)
hours' notice, or double time (2x) shall be paid to the employee for the hours
worked on that changed shift.
3.4. Minimum Shift for Employees Scheduled to Work - An employee
who is scheduled or notified to report and who does report for work shall be
provided with an assigned minimum of four (4) hours of work on the job for
which he was scheduled or notified to report or, in the event such work is not
available, shall be assigned to another job of at least equal rate of pay for
which he is qualified. Provisions of this paragraph shall not apply in the
event of fire, storm, flood, power failure, work stoppage, or causes beyond the
control of the Company.
3.5. Rest Period Between Shifts - An employee shall be allowed a
ten (10) hour rest period between the completion of one (1) day's tour
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of duty and the beginning of the next day's tour of duty and before the start of
a scheduled vacation.
3.6.A. Preparation Time -
1. Unless a separate crew activates and checks out
equipment before the start of each day's operation, the employee(s) assigned to
activate the equipment shall be allowed a fifteen (15) minute "sign-on" time
allowance. At the conclusion of each day's operation, a fifteen (15) minute
"sign-off" time period shall be allowed.
2. The Company shall allow adequate time prior to live
programming for preparation, and shall schedule in employees accordingly.
3.6.B. Technology - It is management's intention, given existing
technology utilized by the Station and the current conditions on all scheduled
live news broadcasts, to schedule a crew of at least six (6) persons covered by
the Contract.
3.7. Travel Time - An employee shall be credited with the following
time allowances:
A. When sent out of Brooke, Hancock, Ohio, Marshall,
Belmont and Jefferson Counties on an assignment requiring him to remain away
overnight, he shall be credited with no less than one (1) eight (8) hour shift
for each day he is away on such assignment. All time spent in traveling up to
eight (8) hours in any one (1) day, exclusive of the time from midnight to 8:00
A.M., when sleeping accommodations are furnished, shall be considered as time
worked
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except meal times. All time spent driving a car shall be considered as
time worked.
B. When sent out of Brooke, Hancock, Ohio, Marshall,
Belmont, and Jefferson Counties on an assignment which requires him to return
to the point from which he started on the same workday, he shall be credited
with the total elapsed time spent on such assignment.
C. He shall not be credited with time spent reporting to
or from work at studios or transmitters, but shall be credited with all time
spent thereafter during his day's assignment, such as traveling between
studios, remotes, transmitters, or other assignments on which traveling is
required.
3.8 - Overtime and Premium Pay - Employees shall be paid overtime,
computed in tenths of an hour segments, for work performed as follows:
A. Time and one-half (1 1/2) in excess of forty (40)
hours in one (1) week actually worked.
B. Time and one-half (1 1/2) on an employee's day off.
C. All hours worked within a period of less than a
ten (10) hour rest period shall be paid for at overtime rate of time and
one-half (1 1/2).
D. Each employee who is called to work or scheduled to
work on his time off or called back to work on his ten (10) hour rest period,
will receive double time (2x). This extra pay will not apply, however, if an
employee is normally scheduled more than forty (40)
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hours per week and it is necessary to work hours in excess of forty (40), nor
will it apply on a call back for an emergency or circumstances beyond the
control of Management, nor will it apply due to another employee's absence.
E. Overtime pay shall not apply for both daily and
weekly computation. Any hours actually worked on a holiday shall count as
hours worked in computing the forty (40) hours after which time and one-half
(1 1/2) is payable under sub-paragraph "A" above, otherwise there will be no
pyramiding of overtime or premium pay.
F. Overtime work, if available, will be offered to all
employees in the same manner as in the past. Employees will not be penalized
if they decline to work excessive amounts of overtime.
3.9. Travel Expenses - The Company shall reimburse each employee
for all reasonable traveling expenses when travel by such employee is required
or authorized by the Company. In the event any employee is required to use his
own automobile for transportation in connection with his assigned duties, the
Company shall reimburse such employee at the rate of twenty-nine cents ($0.29)
per mile for such use. The Company shall have the right to determine the
method of transportation, except that an employee shall not be required to use
his own automobile unless he consents thereto. Where the transportation of
equipment is necessary, the use of public motor buses shall not be required.
An employee shall be reimbursed weekly for all authorized expenditures made for
and on behalf of his assignment, as provided herein, upon submitting an
itemized statement of his expenses to the Company.
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3.10. Wages
A. Employees hired on or after December 1, 1997, shall
be hired at no less than $6.50 per hour. All other employees shall receive
the following wage increases:
EFFECTIVE DATE HOURLY INCREASE
-------------- ---------------
12/01/97 $.40
12/01/98 $.40
12/01/99 $.40
Switcher/Director: Scale plus $0.15/hour
Maintenance Engineers: Scale plus $0.15/hour
3.11 Shift Differential - A shift differential of $.25 per hour
will be paid to employees for regularly scheduled hours worked between 12
midnight and 7:00 a-m.
3.12. Payday - Payday shall be every other Friday.
3.13. Holidays -
A. Overtime at the rate of two (2) times the regular
rate of pay shall be paid for all hours worked by an employee during any of the
following six (6) holidays:
New Year's Day (January 1st)
Independence Day (July 4th)
Easter Sunday
Labor Day (First Monday in September)
Thanksgiving Day (Fourth Thursday in November)
Christmas Day (December 25th)
In addition, each full-time employee who has satisfied his
probationary period shall be entitled to two (2) personal holidays each
contract year. The employee shall be required to give at least two (2) weeks'
advance notice of his intention to take such a holiday
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and it shall be subject to operating requirements as determined by the Company.
B. The overtime rate shall apply for the twenty-four
(24) hour period beginning at 12:01 A.M. of the holiday, or turn starting
nearest thereto, and shall end twenty-four (24) hours later.
C. An employee who does not work on a holiday listed
above shall be paid an amount equivalent to eight (8) times his straight time,
regular hourly rate of pay, provided, however, that if an eligible employee who
is scheduled to work on any such holiday fails to report and perform his
scheduled or assigned work, he shall become ineligible to be paid for the
unworked holiday.
D. No employee shall receive more than two (2) times his
regular rate of pay for hours worked on any holiday.
3.14. Vacations -
A. Each full-time employee in the employ of the Company
on January 1st of each year, and who performs work during that year, shall
receive a vacation with full pay in advance, according to length of service
with the Company in the year preceding such vacation as follows:
YEARS COMPLETED WEEKS OF
SERVICE VACATION HOURS OF PAY
------- -------- ------------
1 1 40
2 - 5 2 80
6 - 15 3 120
More than 15 4 160
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During the first calendar year of employment, new employees shall be entitled
to one (1) week of prorated vacation based upon his or her hire date.
In addition, any employee who has worked 35 years or more
shall receive an extra week's pay upon retirement.
B. Relief employees will not be eligible for vacation.
C. The vacation shall be taken between January 1st and
December 31st of each year. An employee may not accrue unused vacation from
year to year unless his or her failure to utilize the vacation leave by
December 31st was a result of Station scheduling requirements which made it
impossible for the employee to utilize his or her remaining vacation.
D. Employees shall have the choice of vacation period
in order of their seniority of service with the Company, provided, however,
that the final right to allot vacations is retained by the Company to assure
the orderly operation of the business.
E. Employees hired prior to November 30, 1997, and have
accrued vacations shall receive a one-time, lump-sum payment of such accrued
vacation. This payment to be made on the first pay period in January 1998.
As of January 1998, all employees will be credited
with vacation according to length of service with the Company.
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Vacation will be credited in the same manner on January 1, 1999, and January 1,
2000.
F. Regularly scheduled part-time employees will receive
vacation allotments on a pro rata basis, based upon the schedule for full-time
employees. For example, if a regular part-time employee works an average of
twenty (20) hours per week, he or she shall receive one-half the vacation
allotment of a regular full-time employee with the same years of completed
service.
G. Any employee whose employment is terminated for any
reason other than discharge for just cause or voluntary resignation shall be
considered as having accrued vacation pay on a pro-rata monthly basis. In the
event an employee terminates employment and has utilized vacation time or
vacation leave in excess of the amount earned for that year, the employee will
be required to make reimbursement for the vacation paid but not earned.
3.15. Sick Leave and Funeral Leave -
A. On January 1, 1998, and each succeeding year on
January 1, each employee shall receive six (6) sick days (48 hours) per year
with a carryover of not more than ten (10) days (80 hours) of unused leave from
the previous year.
Any employee who has accrued sick days as of December 31,
1997, over the the (10) days (80 hours) will receive a one-time, lump-
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sum payment for such hours. This payment to be made on the first pay period in
January 1998.
B. Pay allowance will be paid for sickness of employees
incapacitating them for work. A doctor's certificate must be presented before
pay will be allowed.
C. Pay allowance will be paid up to three (3) days for
death and funerals in the immediate family. This includes brother, sister,
father, mother, son, daughter, wife, husband, provided the employee attends the
funeral.
D. Pay allowance will be paid for two (2) days for
attending a funeral for mother-in-law, father-in-law, sister-in-law,
brother-in-law, grandmother or grandfather.
E. Pay allowance will be paid only for days missed that
are regular scheduled workdays for the employee.
F. Pay allowance will be considered lost for computing
weekly overtime pay.
G. Leave allowances under this Section will continue on
the same basis as heretofore granted by the Company without counting against
annual allowances. Duplication of pay allowances will not be permitted.
H. The allowances established herein are given only to
take care of absences that are unavoidable, and are to be taken only when the
employee conscientiously feels that attendance would not be in the best
interest of himself or the Company.
3.16. Pension Plan - Employees are entitled to participate in the
Company's 401(k) plan providing they meet the eligibility requirements
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as specified in the Plan Summary. The employer's contribution formula will be
as follows:
<TABLE>
<S> <C>
Employee Contribution - Up to 15% of gross pay
Employer Contribution - Dec. 1, 1997 - Nov. 30, 1998: 0%
Dec. 1, 1998 - Nov. 30, 1999: 1% of Employee Contribution
Dec. 1, 1999 - Nov. 30, 2000: 2% of Employee Contribution
</TABLE>
A Plan Summary will be made available to the Employee Participant.
3.17. Group Life, Hospitalization, Major Medical and Dental
Insurance - The Company shall continue to provide for existing full-time
employees and their dependents such hospitalization coverage, major medical
coverage, life, vision, dental coverage, short-term and long-term disability
insurance, and long-term care insurance as is currently provided at the signing
of this Contract through the Sunrise Television Corp. Health Insurance Plan.
The cost of the foregoing insurance for both employee and their dependents shall
be paid for monthly on a 75%-Company and 25% employee ratio throughout the term
of this Agreement.
Full-time unit employees shall have the option to continue
their enrollment in such HMO plans as were in force and which remain available
at the contribution rate of 75%-Company and 25%-employees. Employees who
enroll with the HMO for their health coverage will be entitled to the current
Company life, disability, and long-term care insurance as well. Employees with
HMO insurance coverage will not be entitled to the Company's current Health,
Dental, Vision, and Prescription Care insurance coverage.
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Except with regard to the sharing formula for bargaining unit
employees, which shall not be changed except by negotiation, the Employer may
make other changes in such insurance as it deems appropriate, so long as it
does not discriminate between bargaining unit and non-bargaining unit
employees.
In the event that the Company is required by any law to
contribute to a National Health Insurance Plan for its employees, the insurance
benefits will be revised to reflect nonduplication of benefits and employee and
Company contribution.
3.18. Bonuses - Bonuses are granted at the will and pleasure of the
Station management.
SECTION 4
4.1. Hazardous Work -
A. For reasons of safety, no employee shall be required
to perform hazardous work unless another employee or other qualified person is
in the area. There shall be mutual agreement between the Company and Union as
to definition of what comprises hazardous work.
B. Employees shall not be required to climb or work at
heights in excess of twenty-five (25) feet above the floor. Should an employee
consent to such climbing or hazardous work, he shall receive double his hourly
rate of pay for such work but not less than $10.00 per such assignment.
4.2. Tools - The Company shall furnish all tools and equipment
necessary for the installation, repair and maintenance of equipment.
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4.3. Clean and Safe Conditions. - The Company will provide clean
and sanitary wash and rest rooms. It is the intent of both the Union and
management to keep all work areas clean and safe at all times.
SECTION 5
5.1. Leave of Absence -
A. Any employee shall, for valid health reasons, be
granted a leave of absence not to exceed six (6) months, provided such leave of
absence is approved by both the Company and the Union. An approved copy of
such leave of absence shall be furnished the employee by the Company. Upon the
return of an employee from a leave of absence, he shall be re-employed in the
position held immediately preceding such leave, provided such still exists;
otherwise, he shall be re-employed in a position as nearly the same as
practicable. In computing the employee's seniority, except as it pertains to
wages, such leave of absence shall be credited the employee as time worked.
The employee will not be permitted to perform outside work or receive wages or
remuneration during the time of leave of absence. The Employer and the Union
will comply with the federal Family and Medical Leave Act (the "FMLA"). Any
leave granted by the Employer pursuant to the FMLA shall run concurrently with
the non-FMLA leave provisions contained in this section.
B. The Company agrees to grant a leave of absence to an
employee who is elected or appointed to a position with the Union, or any
employee who attends a school to pursue a course in broadcasting, which
requires his absence from work. Such leave shall be for a
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period of not more than one (1) year. Such leave of absence shall not interrupt
the employee's seniority, and if he returns to work at the expiration of such
leave, he shall resume his position based on his total seniority. This
provision shall be available to not more than one (1) employee at any time.
5.2. Layoffs and Preferential Re-Hire -
A. Should it become necessary at any time for the
Company to lay off any employee, he shall be granted a service letter at his
request. If thereafter a vacancy occurs in the bargaining unit of the
employees, he shall be given preference in filling such vacancy, at a rate of
pay commensurate with his length of service at the time of his layoff. To
receive this preferential consideration for more than six (6) months, and not
to exceed one (1) year, an employee who has been laid off must give written
notice to the Company of his availability every three (3) months after the
first six (6) months from date of his layoff.
B. Layoffs shall be made in inverse order of seniority
of the employees. For the purpose of determining such seniority, all employees
in the employ of the Company at the time of the execution of this Agreement
shall be given credit for the time they have heretofore been continuously
employed within the jurisdiction of work covered by this Agreement for the
Company, and the seniority of any employee hereafter employed shall begin as of
the date of his employment. This Section shall not apply to temporary relief
employees.
5.3. Discharges - The Company shall have the right to discharge any
employee for just cause, including but not limited to
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insubordination, fighting on station premises, the violation of any Local, State
or Federal rule or regulation pertaining to the operation of the Company's
business, the possession or use of alcohol or illegal drugs on Company premises
or working under their influence or refusing to submit to a blood or urine test
to determine such influence if the Company has reasonable suspicion to believe
that the employee has reported to work or is working under their influence. (In
the testing procedure, the parties shall designate a testing laboratory and the
employee shall be permitted to submit a split sample. Employees who test
positive on the first incident shall be entitled to enroll in a rehabilitation
program on a leave of absence instead of discharge.) If the discharge is
revoked, the employee shall be returned to employment and receive any
compensation lost by him at his regular rate of pay for the time lost. The
employee may at any time within five (5) working days from the filing of the
Company's decision, present a grievance to be handled in accordance with the
grievance procedure introduced at the arbitration stage.
5.4. Military Service - The Company will provide benefits of the
Selective Service Act of 1948, as amended, to employees, according to its
lawful obligation.
5.5. Management of the Business - The Company, except as clearly
and explicitly abridged by any provision of this Agreement, reserves and
retains exclusively all of its normal and inherent rights with respect to the
management of the business, whether exercised or not, including, but not
limited to, its rights to determine, and from time
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to time redetermine, the number, location and types of its operations and
locations, and the methods, processes, and materials to be employed, to
introduce new and improved methods; to discontinue conduct of its business or
operations in whole or in part; to select and direct the working forces in
accordance with the requirements determined by management to be necessary to the
orderly, efficient and economical operation of the business, such measures to be
administered without discrimination against any employee; management reserves
the right to maintain and require methods of record keeping, provided exercise
of such rights shall not be in violation of other articles contained within this
Agreement.
5.6. Total Agreement - The parties acknowledge that during the
negotiations which resulted in this Agreement, each had the unlimited right and
opportunity to make demands and proposals with respect to any subject or matter
not removed by law from the area of Collective Bargaining, and that the
understanding and agreements arrived at by the parties after the exercise of
that right and opportunity are set forth in this Agreement. Therefore, the
Company and the Union, for the life of this Agreement, each voluntarily and
unqualifiedly waives the right and each agrees that the other shall not be
obligated to bargain collectively with respect to any subject or matter
referred to or covered in this Agreement, even though such subject or matter
may not have been within the knowledge or contemplation of either or both the
parties at the time they negotiated or signed this Agreement.
26
<PAGE> 30
SECTION 6
6.1. Termination of Agreement - Except as otherwise expressly
provided in this Agreement, the Agreement shall become effective as of December
1, 1997, and shall continue in effect to and including midnight of November 30,
2000 and from December 1 to November 30 each year thereafter until terminated
by a sixty (60) day written notice, by either party prior to November 30 each
year.
Either party may, on or before September 30, 2000, give notice
to the other party of the desire of the party giving such notice to negotiate
with respect to the terms and conditions of a new Basic Agreement. If such
notice is given, the parties shall meet within thirty (30) days after September
30, 2000, to negotiate with respect to a new contract. If parties shall not
agree with respect to a new agreement by midnight of November 30, 2000, either
party may thereafter resort to strike or lockout as the case may be in support
of its position.
Any notice to be given under this Agreement shall be given
under registered mail. If by the Company, be addressed to the Business Agent,
I.B.E.W., Local Union No. 246, 626 North Fourth Street, P.O. Box 188,
Steubenville, Ohio 43952, and if by the Union, be addressed to the Company at
WTOV-TV, Box 9999, Steubenville, Ohio 43952.
27
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement this ______ day of December, 1997.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
Local Union No. 246 Smith Acquisition Corp.
International Brotherhood
of Electrical Workers
/s/ James A. Cunningham /s/ Timothy S. McCoy
- -------------------------- -------------------------------
Business Manager President & General Manager
Subject to the approval of the
International President of the
International Brotherhood of
Electrical Workers.
28
<PAGE> 32
EXHIBIT A
CHECK-OFF AUTHORIZATION
You are hereby authorized and directed to check-off from my wages my
current membership and any initiation dues payable to the International
Brotherhood of Electrical Workers. I authorize and direct you to deduct such
dues from my pay and to remit the same to the Union.
This assignment, authorization and directive shall be irrevocable for
the period of one (1) year or until the termination of the current collective
agreement between the Employer and the Union, whichever occurs sooner; and I
agree and direct that this assignment, authorization and direction shall be
automatically renewed and shall be irrevocable for successive periods of one
(1) year each or for the period of each succeeding applicable collective
agreement between the Employer and the Union, whichever shall be shorter,
unless written notice is given by me to the Company and the Union not more than
twenty (20) days and not less than ten (10) days prior to the expiration of
each period of one (1) year, or of each applicable collective agreement between
the Employer and the Union, whichever occurs sooner.
______________________________________
Signature
______________________________________
Date
29
<PAGE> 1
Exhibit 10.38
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is entered into as of
October 1, 1997 by and between WJAC, INCORPORATED, a Pennsylvania corporation
("WJAC") and STC BROADCASTING, INC., ("STC"), a Delaware corporation.
WHEREAS, STC License Company, a Delaware corporation and a sister
company to WJAC, is the licensee of WJAC-TV, Channel 6, Johnstown, Pennsylvania
(the "Station");
WHEREAS, WJAC desires to retain the services of STC in the management
of the Station; and
WHEREAS, STC desires to provide management services to WJAC for the
Station.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Engagement. WJAC, as the owner of the Station, hereby retains STC to
provide advice and consultation on the operation of the Station in
accordance with and subject to the terms of this Agreement. STC shall
devote such time and attention to the business and affairs of the
Station as reasonably and prudently necessary or proper for the
conduct of STC's duties hereunder.
2. Services. STC shall provide the following services to WJAC for a
five-year period commencing October 1, 1997 and ending September 30,
2002 as follows:
(a) assist in preparation of the Station's operating and
salary budgets and assist in cost controls of
departmental budgets;
(b) advise and consult on selection of senior management
of the Station, including general and sales managers
and department managers;
(c) advise on the purchase of film and syndicated
programming and program schedule changes for the
Station;
(d) advise on the purchase of capital assets and
development of a long-term program for capital
replacement for the Station (including the
implementation of HDTV operations);
(e) advise on negotiations with unions and talent
contracts and the development of employee procedures
and benefits for the Station and monitor the
Station's compliance with their EEOC programs;
(f) assist in the identification of replacement
employees and the training of new and present staff
at the Station;
(g) assist in the development and maintenance of
accounting systems, internal controls procedures and
management reporting systems at the Station;
<PAGE> 2
(h) assist in the daily operations and management of the
Station as reasonably requested by WJAC; provided,
however, that nothing herein shall require STC to
spend any specific amount of time on site at the
Station;
(i) advise and provide assistance regarding employee
benefits for the Station's employees;
(j) coordinate cash management system and communications
with Station's senior lenders; and
(k) assist in the completion of the audit of the Station's
financial statements and preparation of Federal and
State tax returns.
3. Payment for Services. Commencing October 1, 1997 and payable
thereafter on the 1st day of each month until the termination of
the services to be provided to WJAC pursuant to the terms of this
Agreement, WJAC shall pay to STC at 3839 4th Street North, Suite
420, St. Petersburg, Florida 33703, or such other address as
requested in writing by STC, the following monthly compensation:
October 1, 1997 through September 30, 1998 $15,000
October 1, 1998 through September 30, 1999 $15,750
October 1, 1999 through September 30, 2000 $16,538
October 1, 2000 through September 30, 2001 $17,364
October 1, 2001 through September 30, 2002 $18,233
The foregoing payments shall be subject to the covenants
relating to financial performance as contained in the Credit Agreement
dated as of February 28, 1997, as amended, among STC, as Borrower, the
Lenders party thereto, NationsBank of Texas, N.A., as Documentation
Agent, and The Chase Manhattan Bank, as Administrative and Syndication
Agent, (the "Credit Agreement") or any replacement senior debt
financing. Any payments due hereunder that are not permitted to be
made by such covenants shall accrue and shall be paid to STC as soon
as they are permitted to be paid in accordance with the terms of the
Credit Agreement or any replacement senior debt financing. The
compensation set forth above is to be paid in full consideration of
all services to be rendered by STC under this Agreement.
4. Limitation of Liability. STC's liability arising out of any failure
by STC to perform the services set forth in Section 2 of this
Agreement shall be limited to an appropriate reduction in the amount
payable by WJAC to STC. STC shall not be liable to WJAC for any
damages, either direct, indirect, consequential, special, incidental,
actual, punitive, or any other damages, or for any lost profits of
any kind or nature whatsoever, due to mistakes, accidents, omissions,
interruptions, delays, or errors arising out of or relating to this
Agreement; provided, however, that STC shall be liable, without
limitation, for loss, damage or injury resulting from the gross
negligence or intentional misconduct of STC.
5. Termination. WJAC may terminate this Agreement without cause upon
the sale of the Station. WJAC may terminate this Agreement at any
time on thirty (30) days written notice based on any material failure
by STC to perform its duties hereunder.
<PAGE> 3
6. Notices. All notices and communications required by this Agreement
shall be required in writing, mailed by first-class registered or
certified mail, addressed as follows:
(i) If to STC:
STC Broadcasting, Inc.
3839 4th Street North
Suite 420
St. Petersburg, Florida 33703
Attention: David A. Fitz
(ii) If to WJAC:
WJAC, Incorporated
49 Old Hickory Lane
Johnstown, PA 15905
Attention: Marty Ostrow
The parties shall have the right during the term of this Agreement to
change their respective addresses; however, for such notice to be valid and
effective, any such notice must be actually received (as evidenced by a
return receipt). All payments made pursuant to this Agreement shall be
made at the address at which notices are sent, unless otherwise specified
in writing.
7. Entire Agreement; Amendment. This Agreement contains the entire
agreement between the parties. No amendment, modification or
discharge of this Agreement shall be valid or binding unless set forth
in writing and executed by each party to this Agreement.
8. Choice of Law. This Agreement shall be governed by and construed
under and in accordance with the laws (but not the law of
conflicts) of the State of New York.
9. Authorization. Each party to this Agreement represents and warrants to
each other party of this Agreement that the execution, delivery and
performance of this Agreement have been validly authorized and
constitutes a valid and binding agreement by and between WJAC and STC.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or
has caused this Agreement to be duly executed and delivered in its name on its
behalf, all of as the day and year first above written.
WJAC, INCORPORATED
By: /s/ Martin Ostrow
-------------------------
Martin Ostrow
President
STC BROADCASTING, INC.
By: /s/ David A. Fitz
----------------------------
David A. Fitz,
Senior Vice President, Chief Financial
Officer, Secretary
<PAGE> 1
Exhibit 10.39
WJAC ACQUISITION CORP.
3839 4TH STREET NORTH, STE 420
ST. PETERSBURG, FLORIDA 33703
October 1, 1997
STC Broadcasting, Inc.
3839 4th Street North, Suite 420
St. Petersburg, Florida 33703
Attn: David A. Fitz
Dear Dave:
Reference is made to that certain Agreement and Plan of Merger, dated
as of May 9, 1997 (the "Merger Agreement"), by and among WJAC, Incorporated, a
Pennsylvania corporation (the "Company"), STC Broadcasting, Inc., a Delaware
corporation ("Parent") and WJAC Acquisition Corp., a Pennsylvania corporation
and a wholly-owned subsidiary of Parent ("Subsidiary"), pursuant to which
Subsidiary shall merge with and into the Company, the separate corporate
existence of Subsidiary shall cease, and the Company shall continue its
corporate existence as a wholly-owned subsidiary of Parent.
Subsidiary hereby requests that Parent loan to Subsidiary and Parent
hereby agrees to loan to Subsidiary, an aggregate principal amount of
Thirty-Seven Million Five Hundred Thousand Dollars ($37,500,000) (the "Loan").
The proceeds from the Loan shall be used for the sole and exclusive purpose of
consummating the Merger under the Merger Agreement.
Contemporaneously with the closing under the Merger Agreement, (a)
Subsidiary shall execute and deliver to Parent a promissory note in the form of
Exhibit A attached hereto (the "Promissory Note"), and (b) Parent shall wire
the $37,500,000 proceeds of the Loan as Subsidiary shall direct in written wire
instructions delivered to Parent.
This Letter Agreement, together with the attached the Promissory Note,
sets forth the entire agreement between Subsidiary and Parent with respect to
the Loan and supersedes all prior oral or written agreements, commitments or
understandings with respect to such matters.
Please acknowledge your understanding of and agreement with the
foregoing by signing this Letter Agreement in the space provided below and
returning it to me. This Letter Agreement may be executed in counterparts.
WJAC ACQUISITION CORP.
By: /s/ Martin Ostrow
-------------------------------
Name: Martin Ostrow
Its: President
Accepted and Agreed:
STC BROADCASTING, INC.
By: /s/ David A. Fitz
--------------------------
Name: David A. Fitz
Its: Senior Vice President,
Chief Financial Officer and Secretary
<PAGE> 2
EXHIBIT A
FORM OF PROMISSORY NOTE
<PAGE> 3
PROMISSORY NOTE
$37,500,000
JOHNSTOWN, PENNSYLVANIA October 1, 1997
FOR VALUE RECEIVED, the undersigned, WJAC ACQUISITION CORP., a
Pennsylvania corporation ("Subsidiary"), does hereby promise to pay to the
order of STC BROADCASTING, INC., a Delaware corporation ("Parent"), at its
offices located at 3839 4th Street North, Suite 420, St. Petersburg, Florida
33703, in lawful money of the United States, the original principal sum of
Thirty-Seven Million Five Hundred Thousand and No/100 Dollars ($37,500,000),
together with interest on the principal balance from time to time remaining
unpaid, at the rate herein provided. The obligations of payment of principal
and interest hereunder are hereinafter referred to as the "Indebtedness" and
this Promissory Note is hereinafter referred to as this "Note."
1. Payment of Interest.
(a) Subsidiary promises to pay interest on the unpaid principal
amount of this Note at an interest rate per annum equal to
eleven percent (11%).
(b) Interest shall be due and payable on the first day of March
and September of each calendar year during the term of this
Note, beginning on March 1, 1998.
(c) If any payment of Indebtedness on this Note shall become due
on a Saturday, Sunday or other day on which banks in New
York, New York are legally closed, such payment shall be
made on the next succeeding business day.
2. Payment of Principal. Principal on this Note, together with all accrued
but unpaid interest thereon, shall be due and payable on the demand of
Parent.
3. Prepayment. Subsidiary shall be entitled to prepay, in full or in part,
without penalty, all sums due under this Note.
4. Remedies. Upon default in the payment of the amounts due hereunder which
default has not been remedied within 10 days after written notice thereof
is given by Parent to Subsidiary, then Parent may, at its sole discretion,
declare the unpaid principal balance of this Note, together with all
accrued and unpaid interest thereon, to be immediately due and payable, and
the same shall become and be due and payable, without presentment, demand,
protest, notice of intent to accelerate or other notice of any kind, all of
which are hereby expressly waived, and Parent may exercise all other
remedies available, at law, in equity or hereunder.
5. Governing Law. This Note shall be construed in accordance with and
governed by the laws of the State of New York.
6. Acknowledgement. Parent and Subsidiary acknowledge that, from and after
the consummation of the transactions contemplated by that certain Agreement
and Plan of Merger, dated as of May 9, 1997, by and among Parent,
Subsidiary, and WJAC, Incorporated, a Pennsylvania corporation ("WJAC"),
pursuant to which Subsidiary shall merge with and into WJAC, the
Indebtedness evidenced by this Note shall be the responsibility and
obligation of WJAC as if WJAC were the maker hereof.
EXECUTED as of the date set forth on the first page of this Note.
<PAGE> 4
WJAC ACQUISITION CORP.,
a Pennsylvania corporation
By: /s/ Martin Ostrow
-----------------------------
Name: Martin Ostrow
Title: President
STC BROADCASTING, INC.,
a Delaware corporation
By: /s/ David A. Fitz
---------------------------
Name: David A. Fitz
Title: CFO
<PAGE> 1
Exhibit 10.40
GUARANTY
GUARANTY (this "Guaranty") given as of February 3, 1998 by STC
BROADCASTING, INC., a Delaware corporation (the "Guarantor"), to TUSCALOOSA
BROADCASTING, INC., a Maryland corporation ("Tuscaloosa"), WPTZ LICENSEE, INC.,
a Maryland corporation ("WPTZ Licensee"), and WNNE LICENSEE, INC., a Maryland
corporation ("WNNE Licensee") (Tuscaloosa, WPTZ Licensee and WNNE Licensee,
collectively, the "Sellers" and, individually a "Seller").
WHEREAS, Sellers and STC Broadcasting of Vermont, Inc., a Delaware
corporation ("Buyer") have entered into an Asset Purchase Agreement, dated as
of even date herewith (the "Purchase Agreement"), pursuant to which Buyer has
agreed to purchase from Sellers and Sellers have agreed to sell to Buyer
substantially all of the assets of the Stations (as defined in the Purchase
Agreement);
WHEREAS, Buyer is a direct or indirect wholly-owned subsidiary of the
Guarantor;
WHEREAS, the Guarantor is receiving direct benefits in connection with
the consummation of the transactions contemplated by the Purchase Agreement;
and
WHEREAS, as an inducement to Sellers to enter into and consummate the
transactions contemplated by the Purchase Agreemrent, the Guarantor is willing
to guarantee the performance obligations of Buyer under the Purchase Agreement
and under the other Buyer Documents (as defined in the Purchase Agreement
(collectively, the "Transaction Documents"));
NOW, THEREFORE, in consideration of the foregoing, the receipt and
adequacy of which are hereby acknowledged, the Guarantor hereby agrees with
Sellers as follows:
1. GUARANTY. The Guarantor hereby irrevocably and
unconditionally guarantees to Sellers the prompt and complete performance of
each and every obligation of Buyer, direct or indirect, now existing or
hereafter arising, under the Transaction Documents, including, without
limitation, the due and punctual performance and observance by Buyer of all of
the terms, covenants, and conditions thereunder.
Subject to the terms and conditions of this Guaranty, this Guaranty is
an absolute, unconditional, continuing guarantee, is in no way conditioned upon
any event or contingency, or upon any attempt to enforce Buyer's performance
under the Transaction Documents or any other right or remedy against Buyer to
collect from Buyer through the commencement of legal proceedings or otherwise,
and shall be binding upon and enforceable in full against the Guarantor without
regard to the genuineness, regularity, validity or enforceability
<PAGE> 2
of the Transaction Documents or any term thereof or lack of capacity, power or
authority of any party executing the Transaction Documents or any circumstance
which might otherwise constitute a defense available to, or a discharge of, the
Guarantor in respect of this Guaranty or the obligations guaranteed hereby.
The obligations of the Guarantor hereunder shall not be affected,
reduced, impaired, limited or discharged, in whole or in part, by reason of the
assertion by Buyer of any claim of any kind relating to Buyer; provided,
however, that the foregoing shall not be deemed to constitute a waiver of any
claims against the Sellers available to Buyer under the Transaction Documents.
The Guarantor hereby acknowledges that it has received and read a copy of each
of the Transaction Documents.
Notwithstanding anything to the contrary set forth in this Guaranty,
the Guarantor's obligations hereunder shall be subject to, and the Guarantor
shall have the benefit of, any limitations, qualifications or other
contingencies on the obligations and liabilities of Buyer under the Transaction
Documents, including, without limitation, the provisions of Section 12.4 of the
Purchase Agreement.
2. TERM. This Guaranty is a continuing guaranty and shall
continue in full force and effect until all performance obligations of Buyer
under the Transaction Documents and all obligations under this Guaranty have
been fully and rcompletely satisfied, notwithstanding any act, omission, or
thing which might otherwise operate as a legal or equitable discharge of the
Guarantor.
3. OBLIGATIONS ARISE UPON DELIVERY. The obligations of the
Guarantor hereunder shall arise absolutely, irrevocably and unconditionally
upon execution and delivery of this Guaranty.
4. MODIFICATIONS TO TRANSACTION DOCUMENTS; BANKRUPTCY. The
obligations of the Guarantor hereunder shall not be reduced, limited, waived
or terminated as a result of any amendment, waiver or modification of any
Transaction Document. The obligations of the Guarantor shall not be released
or affected by voluntary or involuntary proceedings by or against Buyer in
bankruptcy or for reorganization or other relief under any bankruptcy or
insolvency law.
5. REPRESENTATIONS AND WARRANTIES; COVENANTS. The Guarantor
hereby represents and warrants to Sellers as follows: (a) the Guarantor is a
corporation duly organized and validly existing under the laws of Delaware;
(b) the execution, delivery and performance of this Guaranty and of every
term, covenant or condition herein provided for are within its corporate power
and authority, are duly authorized by all proper and necessary corporate action
and are not in conflict with its certificate of incorporation and bylaws or any
indenture, contract or agreement to which the Guarantor is a party or by which
the Guarantor is bound, or with any statute, rule, regulation, decree, judgment
or order binding upon the Guarantor and do not require the consent or approval
of any governmental authority or other third party which has not been obtained;
(c) this Guaranty has been validly executed by the person authorized to do
so by
-2-
<PAGE> 3
the Guarantor and delivered by the Guarantor to Sellers and constitutes a
legal, valid and binding obligation of the Guarantor and is enforceable against
the Guarantor in accordance with its terms except as limited by general
principles of equity; and (d) the Guarantor has received adequate, sufficient
and valuable consideration for the execution, delivery and performance of this
Guaranty.
6. WAIVERS. The Guarantor hereby waives notice of, and proof of
reliance by Sellers upon and acceptance of this Guaranty, and of nonperformance
by the Buyer of its obligations under the Transaction Documents and of any other
notices or demands of any kind whatsoever and any requirement that Sellers
exhaust any right or take any action against Buyer or any other person or entity
or any collateral.
7. SUBROGATION. The Guarantor will not exercise any rights
which it may acquire by way of subrogation under this Guaranty or otherwise
until the performance in full of all obligations guaranteed pursuant to this
Guaranty.
8. INDEPENDENT OBLIGATIONS. The Guarantor agrees that the
obligations of the Guarantor hereunder are irrevocable and are independent of
the obligations of Buyer under the Transaction Documents; that a separate action
or actions may be brought and prosecuted against the Guarantor regardless of
whether any action is brought against Buyer or whether Buyer is joined in any
such action or actions; and that the Guarantor waives the benefit of any statute
of limitations affecting the liability of the Guarantor hereunder or the
enforcement hereof.
9. GENERAL PROVISIONS.
(a) This Guaranty constitutes the entire agreement of the
Guarantor with respect to the subject matter hereof.
(b) Failure or delay by Sellers in exercising any rights
or remedies hereunder shall not operate as a waiver thereof. A waiver by
Sellers on any one occasion shall not be deemed a waiver on any subsequent
occasion, nor shall any single or partial exercise of any right by Sellers
preclude any other or further exercise thereof or the exercise of any other
right. All rights and remedies of Sellers hereunder, under the Transaction
Documents, or any other agreement or instrument, or otherwise available to
Sellers, shall be cumulative.
(c) This Guaranty may not be assigned by the Guarantor
without the prior written consent of Sellers. This Guaranty shall inure to the
benefit of Sellers and their successors and assigns permitted by the
Transaction Documents, and shall be binding upon and enforceable against the
Guarantor and its successors and assigns.
(d) The headings herein are for purposes of reference
only and shall not be considered in construing this Guaranty.
-3-
<PAGE> 4
(e) THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The representations and
warranties contained herein shall survive the execution and delivery of this
Guaranty.
(f) Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
(g) All notices, demands or other communications which may
or are required to be given hereunder or with respect hereto shall be in
writing, shall be delivered personally or sent by nationally recognized
overnight delivery service, charges prepaid or by registered or certified mail,
return receipt requested, or by telecopier (fax), and shall be deemed to have
been given or made when personally delivered, the next business day after
delivery to such overnight delivery service, five (5) days after deposited in
the mail, first class postage prepaid, or when received if sent by telecopier
(fax), addressed or sent as follows:
If to Sellers:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: David D. Smith, President
Fax: (410) 467-5043
with copies (which shall not constitute notice) to:
Thomas & Libowitz, P.A.
100 Light Street, Suite 1100
Baltimore, Maryland 21202
Attn: Steven A. Thomas, Esq.
Fax: (410) 752-2046
and to:
Sinclair Communications, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: General Counsel
Fax: (410) 662-4707
If to Guarantor:
-4-
<PAGE> 5
STC Broadcasting, Inc.
3839 4th Street North
Suite 420
St. Petersburg, Florida 33703
Attn: David Fitz
Fax: (813) 821-8092
with copies (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn: William S. Reyner, Jr., Esq.
Fax: (202) 637-5910
and to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attn: Larry D. Stuart
Fax: (214) 740-7355
or such other address as the addressee may indicate by written notice to the
other parties.
(h) The Guarantor hereby irrevocably consents to the
nonexclusive jurisdiction and venue of the courts of the State of New York and
of any federal court located in New York County, New York, in connection with
any action, suit or proceeding arising out of or relating to this Guaranty.
The Guarantor waives the right to a trial by jury in any action, suit or
proceeding arising out of or relating to this Guaranty or the Transaction
Documents. The Guarantor agrees that a final judgment in any such action, suit
or proceeding shall be conclusive for purposes or enforcement in other
jurisdictions by suit on the judgment or in any other manner provided by
applicable law.
(i) At Sellers' option, the Guarantor may be joined in any
action, suit or proceeding against Buyer in connection with the Transaction
Documents. The Guarantor shall be conclusively bound by the judgment in any
action, suit or proceeding by Sellers against Buyer related to the Transaction
Documents as if the Guarantor was a party thereto. The Guarantor shall be so
bound even if it is not joined in such action, suit or proceeding.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the
date and year first stated above.
STC BROADCASTING, INC.
By: /s/ David A. Fitz
---------------------------------
Name: David A. Fitz
Title: Chief Financial Officer
<PAGE> 1
Exhibit 10.41
GUARANTY
GUARANTY (this "Guaranty") given as of February 3, 1998 by SINCLAIR
BROADCAST GROUP, INC., a Maryland corporation (the "Guarantor"), to STC
BROADCASTING OF VERMONT, INC. ("Buyer").
WHEREAS, Tuscaloosa Broadcasting, Inc., a Maryland corporation
("Tuscaloosa"), WPTZ Licensee, Inc., a Maryland corporation ("WPTZ Licensee"),
and WNNE Licensee, Inc., a Maryland corporation ("WNNE Licensee") (Tuscaloosa,
WPTZ Licensee and WNNE Licensee, collectively, the "Sellers") and Buyer have
entered into an Asset Purchase Agreement, dated as of even date herewith (the
"Purchase Agreement"), pursuant to which Buyer has agreed to purchase from
Sellers and Sellers have agreed to sell to Buyer substantially all of the
assets of the Stations (as defined in the Purchase Agreement);
WHEREAS, each Seller is a direct or indirect wholly-owned subsidiary of
the Guarantor;
WHEREAS, the Guarantor is receiving direct benefits in connection with
the consummation of the transactions contemplated by the Purchase Agreement;
and
WHEREAS, as an inducement to Buyer to enter into and consummate the
transactions contemplated by the Purchase Agreement, the Guarantor is willing to
guarantee the performance obligations of the Sellers under the Purchase
Agreement and under the other Seller Documents (as defined in the Purchase
Agreement (collectively, the "Transaction Documents"));
NOW, THEREFORE, in consideration of the foregoing, the receipt and
adequacy of which are hereby acknowledged, the Guarantor hereby agrees with
Buyer as follows:
1. GUARANTY. The Guarantor hereby irrevocably and
unconditionally guarantees to Buyer the prompt and complete performance of each
and every obligation of the Sellers, direct or indirect, now existing or
hereafter arising, under the Transaction Documents, including, without
limitation, the due and punctual performance and observance by the Sellers of
all of the terms, covenants, and conditions thereunder.
Subject to the terms and conditions of this Guaranty, this Guaranty is
an absolute, unconditional, continuing guarantee, is in no way conditioned upon
any event or contingency, or upon any attempt to enforce the Sellers'
performance under the Transaction Documents or any other right or remedy
against the Sellers to collect from the Sellers through the commencement of
legal proceedings or otherwise, and shall be binding upon and enforceable in
full against the Guarantor without regard to the genuineness, regularity,
validity or enforceability of the Transaction Documents or any term thereof or
lack of capacity, power or
<PAGE> 2
authority of any party executing the Transaction Documents or any circumstance
which might otherwise constitute a defense available to, or a discharge of, the
Guarantor in respect of this Guaranty or the obligations guaranteed hereby.
The obligations of the Guarantor hereunder shall not be affected,
reduced, impaired, limited or discharged, in whole or in part, by reason of the
assertion by the Sellers of any claim of any kind relating to the Sellers;
provided, however, that the foregoing shall not be deemed to constitute a
waiver of any claims against the Buyer available to the Sellers under the
Transaction Documents. The Guarantor hereby acknowledges that it has received
and read a copy of each of the Transaction Documents.
Notwithstanding anything to the contrary set forth in this Guaranty,
the Guarantor's obligations hereunder shall be subject to, and the
Guarantor shall have the benefit of, any limitations, qualifications or other
contingencies on the obligations and liabilities of the Sellers under the
Transaction Documents, including, without limitation, the provisions of Section
12.4 of the Purchase Agreement.
2. TERM. This Guaranty is a continuing guaranty and shall
continue in full force and effect until all performance obligations of the
Sellers under the Transaction Documents and all obligations under this Guaranty
have been fully and completely satisfied, notwithstanding any act, omission, or
thing which might otherwise operate as a legal or equitable discharge of the
Guarantor.
3. OBLIGATIONS ARISE UPON DELIVERY. The obligations of the
Guarantor hereunder shall arise absolutely, irrevocably and unconditionally
upon execution and delivery of this Guaranty.
4. MODIFICATIONS TO TRANSACTION DOCUMENTS; BANKRUPTCY. The
obligations of the Guarantor hereunder shall not be reduced, limited, waived or
terminated as a result of any amendment, waiver or modification of any
Transaction Document. The obligations of the Guarantor shall not be released
or affected by voluntary or involuntary proceedings by or against the Sellers
in bankruptcy or for reorganization or other relief under any bankruptcy or
insolvency law.
5. REPRESENTATIONS AND WARRANTIES; COVENANTS. The Guarantor
hereby represents and warrants to Buyer as follows: (a) the Guarantor is a
corporation duly organized and validly existing under the laws of Maryland; (b)
the execution, delivery and performance of this Guaranty and of every term,
covenant or condition herein provided for are within its corporate power and
authority, are duly authorized by all proper and necessary corporate action and
are not in conflict with its articles of incorporation and bylaws or any
indenture, contract or agreement to which the Guarantor is a party or by which
the Guarantor is bound, or with any statute, rule, regulation, decree, judgment
or order binding upon the Guarantor and do not require the consent or approval
of any governmental authority or other third party which has not been obtained;
(c) this Guaranty has been validly executed by the person authorized to do so
by
-2-
<PAGE> 3
the Guarantor and delivered by the Guarantor to Buyer and constitutes a
legal, valid and binding obligation of the Guarantor and is enforceable against
the Guarantor in accordance with its terms except as limited by general
principles of equity; and (d) the Guarantor has received adequate, sufficient
and valuable consideration for the execution, delivery and performance of this
Guaranty.
6. WAIVERS. The Guarantor hereby waives notice of, and proof of
reliance by Buyer upon and acceptance of this Guaranty, and of nonperformance
by any of the Sellers of their obligations under the Transaction Documents and
of any other notices or demands of any kind whatsoever and any requirement that
Buyer exhaust any right or take any action against the Sellers or any other
person or entity or any collateral.
7. SUBROGATION. The Guarantor will not exercise any rights which
it may acquire by way of subrogation under this Guaranty or otherwise until the
performance in full of all obligations guaranteed pursuant to this Guaranty.
8. INDEPENDENT OBLIGATIONS. The Guarantor agrees that the
obligations of the Guarantor hereunder are irrevocable and are independent of
the obligations of the Sellers under the Transaction Documents; that a separate
action or actions may be brought and prosecuted against the Guarantor
regardless of whether any action is brought against the Sellers or whether the
Sellers are joined in any such action or actions; and that the Guarantor waives
the benefit of any statute of limitations affecting the liability of the
Guarantor hereunder or the enforcement hereof.
9. GENERAL PROVISIONS.
(a) This Guaranty constitutes the entire agreement of the
Guarantor with respect to the subject matter hereof.
(b) Failure or delay by Buyer in exercising any rights or
remedies hereunder shall not operate as a waiver thereof. A waiver by Buyer on
any one occasion shall not be deemed a waiver on any subsequent occasion, nor
shall any single or partial exercise of any right by Buyer preclude any other
or further exercise thereof or the exercise of any other right. All rights and
remedies of Buyer hereunder, under the Transaction Documents, or any other
agreement or instrument, or otherwise available to Buyer, shall be cumulative.
(c) This Guaranty may not be assigned by the Guarantor
without the prior written consent of Buyer. This Guaranty shall inure to the
benefit of Buyer and its successors and assigns permitted by the Transaction
Documents, and shall be binding upon and enforceable against the Guarantor and
its successors and assigns.
(d) The headings herein are for purposes of reference only
and shall not be considered in construing this Guaranty.
-3-
<PAGE> 4
(e) THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The representations and
warranties contained herein shall survive the execution and delivery of this
Guaranty.
(f) Any provision of this Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
(g) All notices, demands or other communications which may
or are required to be given hereunder or with respect hereto shall be in
writing, shall be delivered personally or sent by nationally recognized
overnight delivery service, charges prepaid or by registered or certified mail,
return receipt requested, or by telecopier (fax), and shall be deemed to have
been given or made when personally delivered, the next business day after
delivery to such overnight delivery service, five (5) days after deposited in
the mail, first class postage prepaid, or when received if sent by telecopier
(fax), addressed or sent as follows:
If to Guarantor:
Sinclair Broadcast Group, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: David D. Smith, President
Fax: (410) 467-5043
with copies (which shall not constitute notice) to:
Thomas & Libowitz, P.A.
100 Light Street, Suite 1100
Baltimore, Maryland 21202
Attn: Steven A. Thomas, Esq.
Fax: (410) 752-2046
and to:
Sinclair Communications, Inc.
2000 W. 41st Street
Baltimore, Maryland 21211
Attn: General Counsel
Fax: (410) 662-4707
If to Buyer:
-4-
<PAGE> 5
STC Broadcasting, Inc.
3839 4th Street North
Suite 420
St. Petersburg, Florida 33703
Attn: David Fitz
Fax: (813) 821-8092
with copies (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn: William S. Reyner, Jr., Esq.
Fax: (202) 637-5910
-5-
<PAGE> 6
and to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attn: Larry D. Stuart
Fax: (214) 740-7355
or such other address as the addressee may indicate by written notice to the
other parties.
(h) The Guarantor hereby irrevocably consents to the
nonexclusive jurisdiction and venue of the courts of the State of New York and
of any federal court located in New York County, New York, in connection with
any action, suit or proceeding arising out of or relating to this Guaranty.
The Guarantor waives the right to a trial by jury in any action, suit or
proceeding arising out of or relating to this Guaranty or the Transaction
Documents. The Guarantor agrees that a final judgment in any such action, suit
or proceeding shall be conclusive for purposes or enforcement in other
jurisdictions by suit on the judgment or in any other manner provided by
applicable law.
(i) At Buyer's option, the Guarantor may be joined in any
action, suit or proceeding against the Sellers in connection with the
Transaction Documents. The Guarantor shall be conclusively bound by the
judgment in any action, suit or proceeding by Buyer against any Seller related
to the Transaction Documents as if the Guarantor was a party thereto. The
Guarantor shall be so bound even if it is not joined in such action, suit or
proceeding.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty
as of the date and year first stated above.
SINCLAIR BROADCAST GROUP, INC.
By: /s/ David B. Amy
---------------------------------
Name: David B. Amy
Title: Treasurer and Secretary
-7-
<PAGE> 1
Exhibit 10.42
GUARANTY
GUARANTY (this "Guaranty") given as of February 18, 1998 by
HEARST-ARGYLE TELEVISION, INC., a Delaware corporation (the "Guarantor"), to
STC BROADCASTING, INC., a Delaware corporation ("STC Broadcasting"), STC
BROADCASTING OF VERMONT, INC., a Delaware corporation ("STCBV"), STC LICENSE
COMPANY, a Delaware corporation and wholly-owned subsidiary of STC BROADCASTING
("STC License Company"), and STC BROADCASTING OF VERMONT SUBSIDIARY, INC., a
Delaware corporation and wholly-owned subsidiary of STCBV ("STCBV Sub") (STC
Broadcasting, STCBV, STC License Company and STCBV Sub are collectively
referred to herein as "STC").
WHEREAS, STC and Hearst-Argyle Stations, Inc., a Nevada corporation
("HAT") have entered into an Asset Exchange Agreement, dated as of even date
herewith (the "Exchange Agreement"), pursuant to which STC has agreed to
transfer to HAT substantially all of the assets of the STC Stations, and HAT
has agreed to transfer to STC substantially all of the assets of the HAT
Stations (as such terms are defined in the Exchange Agreement);
WHEREAS, HAT is a direct or indirect wholly-owned subsidiary of the
Guarantor;
WHEREAS, the Guarantor is receiving direct benefits in connection with
the consummation of the transactions contemplated by the Exchange Agreement;
and
WHEREAS, as an inducement to STC to enter into and consummate the
transactions contemplated by the Exchange Agreement, the Guarantor is willing
to guarantee the performance obligations of HAT under the Exchange Agreement
and under the other HAT Documents (as defined in the Exchange Agreement
(collectively, the "Transaction Documents"));
NOW, THEREFORE, in consideration of the foregoing, the receipt and
adequacy of which are hereby acknowledged, the Guarantor hereby agrees with STC
as follows:
1. GUARANTY. The Guarantor hereby irrevocably and
unconditionally guarantees to STC the prompt and complete performance of each
and every obligation of HAT, direct or indirect, now existing or hereafter
arising, under the Transaction Documents, including, without limitation, the
due and punctual performance and observance by HAT of all of the terms,
covenants, and conditions thereunder.
Subject to the terms and conditions of this Guaranty,
this Guaranty is an absolute, unconditional, continuing guarantee, is in no way
conditioned upon any event or contingency, or upon any attempt to enforce HAT's
performance under the Transaction
<PAGE> 2
Documents or any other right or remedy against HAT to collect from HAT through
the commencement of legal proceedings or otherwise, and shall be binding upon
and enforceable in full against the Guarantor without regard to the
genuineness, regularity, validity or enforceability of the Transaction
Documents or any term thereof or lack of capacity, power or authority of any
party executing the Transaction Documents or any circumstance which might
otherwise constitute a defense available to, or a discharge of, the Guarantor
in respect of this Guaranty or the obligations guaranteed hereby.
The obligations of the Guarantor hereunder shall not
be affected, reduced, impaired, limited or discharged, in whole or in part, by
reason of the assertion by HAT of any claim of any kind relating to HAT;
provided, however, that the foregoing shall not be deemed to constitute a
waiver of any claims against STC available to HAT under the Transaction
Documents. The Guarantor hereby acknowledges that it has received and read a
copy of each of the Transaction Documents.
Notwithstanding anything to the contrary set forth in
this Guaranty, the Guarantor's obligations hereunder shall be subject to, and
the Guarantor shall have the benefit of, any limitations, qualifications or
other contingencies on the obligations and liabilities of HAT under the
Transaction Documents, including, without limitation, the provisions of Section
10.4 of the Exchange Agreement.
2. TERM. This Guaranty is a continuing guaranty and
shall continue in full force and effect until all performance obligations of
HAT under the Transaction Documents and all obligations under this Guaranty
have been fully and completely satisfied, notwithstanding any act, omission, or
thing which might otherwise operate as a legal or equitable discharge of the
Guarantor.
3. OBLIGATIONS ARISE UPON DELIVERY. The obligations of
the Guarantor hereunder shall arise absolutely, irrevocably and unconditionally
upon execution and delivery of this Guaranty.
4. MODIFICATIONS TO TRANSACTION DOCUMENTS; BANKRUPTCY.
The obligations of the Guarantor hereunder shall not be reduced, limited,
waived or terminated as a result of any amendment, waiver or modification of
any Transaction Document. The obligations of the Guarantor shall not be
released or affected by voluntary or involuntary proceedings by or against HAT
in bankruptcy or for reorganization or other relief under any bankruptcy or
insolvency law.
5. REPRESENTATIONS AND WARRANTIES; COVENANTS. The
Guarantor hereby represents and warrants to STC as follows: (a) the Guarantor
is a corporation duly organized and validly existing under the laws of
Delaware; (b) the execution, delivery and performance of this Guaranty and of
every term, covenant or condition herein provided for are within its corporate
power and authority, are duly authorized by all proper and necessary corporate
action and are not in conflict with its certificate of incorporation and bylaws
or any indenture, contract or agreement to which the Guarantor is a party or by
which the Guarantor is bound, or with any
-2-
<PAGE> 3
statute, rule, regulation, decree, judgment or order binding upon the Guarantor
and do not require the consent or approval of any governmental authority or
other third party which has not been obtained; (c) this Guaranty has been
validly executed by the person authorized to do so by the Guarantor and
delivered by the Guarantor to STC and constitutes a legal, valid and binding
obligation of the Guarantor and is enforceable against the Guarantor in
accordance with its terms except as limited by general principles of equity;
and (d) the Guarantor has received adequate, sufficient and valuable
consideration for the execution, delivery and performance of this Guaranty.
6. WAIVERS. The Guarantor hereby waives notice of, and
proof of reliance by STC upon and acceptance of this Guaranty, and of
nonperformance by HAT of its obligations under the Transaction Documents and of
any other notices or demands of any kind whatsoever and any requirement that
STC exhaust any right or take any action against HAT or any other person or
entity or any collateral.
7. SUBROGATION. The Guarantor will not exercise any
rights which it may acquire by way of subrogation under this Guaranty or
otherwise until the performance in full of all obligations guaranteed pursuant
to this Guaranty.
8. INDEPENDENT OBLIGATIONS. The Guarantor agrees that
the obligations of the Guarantor hereunder are irrevocable and are independent
of the obligations of HAT under the Transaction Documents; that a separate
action or actions may be brought and prosecuted against the Guarantor
regardless of whether any action is brought against HAT or whether HAT is
joined in any such action or actions; and that the Guarantor waives the benefit
of any statute of limitations affecting the liability of the Guarantor
hereunder or the enforcement hereof.
9. GENERAL PROVISIONS.
(a) This Guaranty constitutes the entire
agreement of the Guarantor with respect to the subject matter hereof.
(b) Failure or delay by STC in exercising any
rights or remedies hereunder shall not operate as a waiver thereof. A waiver
by STC on any one occasion shall not be deemed a waiver on any subsequent
occasion, nor shall any single or partial exercise of any right by STC preclude
any other or further exercise thereof or the exercise of any other right. All
rights and remedies of STC hereunder, under the Transaction Documents, or any
other agreement or instrument, or otherwise available to STC, shall be
cumulative.
(c) This Guaranty may not be assigned by the
Guarantor without the prior written consent of STC. This Guaranty shall inure
to the benefit of STC and their successors and assigns permitted by the
Transaction Documents, and shall be binding upon and enforceable against the
Guarantor and its successors and assigns.
-3-
<PAGE> 4
(d) The headings herein are for purposes of
reference only and shall not be considered in construing this Guaranty.
(e) THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The
representations and warranties contained herein shall survive the execution and
delivery of this Guaranty.
(f) Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
(g) All notices, demands or other communications
which may or are required to be given hereunder or with respect hereto shall be
in writing, shall be delivered personally or sent by nationally recognized
overnight delivery service, charges prepaid or by registered or certified mail,
return receipt requested, or by telecopier (fax), and shall be deemed to have
been given or made when personally delivered, the next business day after
delivery to such overnight delivery service, five (5) days after deposited in
the mail, first class postage prepaid, or when received if sent by telecopier
(fax), addressed or sent as follows:
If to Guarantor:
Hearst-Argyle Television, Inc.
959 Eighth Avenue
New York, New York 10019
Attn: Dean H. Blythe
Fax: (212) 489-2314
with copies (which shall not constitute notice) to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attn: Steven A. Hobbs
Fax: (212) 878-8375
If to STC:
-4-
<PAGE> 5
STC Broadcasting, Inc.
3839 4th Street North
Suite 420
St. Petersburg, Florida 33703
Attn: David Fitz
Fax: (813) 821-8092
with copies (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attn: William S. Reyner, Jr., Esq.
Fax: (202) 637-5910
and to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart
Fax: (214) 740-7355
or such other address as the addressee may indicate by written notice to the
other parties.
(h) The Guarantor hereby irrevocably consents to
the nonexclusive jurisdiction and venue of the courts of the State of New York
and of any federal court located in New York County, New York, in connection
with any action, suit or proceeding arising out of or relating to this
Guaranty. The Guarantor waives the right to a trial by jury in any action,
suit or proceeding arising out of or relating to this Guaranty or the
Transaction Documents. The Guarantor agrees that a final judgment in any such
action, suit or proceeding shall be conclusive for purposes or enforcement in
other jurisdictions by suit on the judgment or in any other manner provided by
applicable law.
(i) At STC's option, the Guarantor may be joined
in any action, suit or proceeding against HAT in connection with the
Transaction Documents. The Guarantor shall be conclusively bound by the
judgment in any action, suit or proceeding by STC against HAT related to the
Transaction Documents as if the Guarantor was a party thereto. The Guarantor
shall be so bound even if it is not joined in such action, suit or proceeding.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty
as of the date and year first stated above.
HEARST-ARGYLE TELEVISION, INC.
By: /s/ Dean H. Blythe
--------------------------------
Dean H. Blythe
Senior Vice President
-6-
<PAGE> 1
EXHIBIT 12
STC BROADCASTING, INC. AND SUBSIDIARIES
FOR THE TEN MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Net loss applicable to common stockholder $(11,582,652)
Fixed charges:
Preferred stock dividends and accretion 3,763,225
Interest expense 9,502,041
Amortization of deferred
financing charges 988,302
Rental expense 0
Income tax benefit (299,000)
------------
Earnings $ 2,371,916
============
Deficiency of earnings to fixed charges $(11,881,652)
============
</TABLE>
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF STC BROADCASTING, INC.
<TABLE>
<CAPTION>
State of
Name Incorporation Doing Business As:
- ------------------------------------------- ------------------ -------------------------
<S> <C> <C>
Smith Acquisition Company Delaware WTOV-TV
Smith Acquisition License Company Delaware WTOV-TV
WJAC, Incorporated Delaware WJAC-TV
Web Works, Inc. Pennsylvania Inactive
STC Broadcasting of Vermont, Inc. Delaware Inactive
STC Broadcasting of Vermont Subsidiary, Inc. Delaware Inactive
STC License Company Delaware Same as STC
Broadcasting, Inc.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> MAR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,632,000
<SECURITIES> 0
<RECEIVABLES> 11,211,000
<ALLOWANCES> 286,000
<INVENTORY> 0
<CURRENT-ASSETS> 17,662,000
<PP&E> 39,454,000
<DEPRECIATION> 3,451,000
<TOTAL-ASSETS> 243,244,000
<CURRENT-LIABILITIES> 11,423,000
<BONDS> 114,500,000
32,263,000
0
<COMMON> 10
<OTHER-SE> 64,012,000
<TOTAL-LIABILITY-AND-EQUITY> 243,244,000
<SALES> 36,231,000
<TOTAL-REVENUES> 36,231,000
<CGS> 21,141,000
<TOTAL-COSTS> 35,177,000
<OTHER-EXPENSES> (330,000)
<LOSS-PROVISION> 49,000
<INTEREST-EXPENSE> 13,265,000
<INCOME-PRETAX> (11,284,000)
<INCOME-TAX> (299,000)
<INCOME-CONTINUING> (11,583,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,583,000)
<EPS-PRIMARY> (11,583)
<EPS-DILUTED> (11,583)
</TABLE>
<PAGE> 1
Exhibit 99.1
WJAC, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997,
TOGETHER WITH REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE> 2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
WJAC, Incorporated and Subsidiaries:
We have audited the accompanying consolidated balance sheet of WJAC,
Incorporated (a Pennsylvania corporation) and Subsidiaries as of September 30,
1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for the period then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of WJAC, Incorporated
and Subsidiaries as of September 30, 1997, and the results of their operations
and their cash flows for the period then ended in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen, LLP
Tampa, Florida,
November 13, 1997
<PAGE> 3
WJAC, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET -- SEPTEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,686,018
Marketable securities 3,699,899
Accounts receivable, net of allowance of $50,000 1,829,838
Program rights - current portion 126,440
Prepaid expenses 102,145
Deferred income taxes 87,500
Other current assets 25,853
-----------
Total current assets 7,557,693
-----------
PROPERTY AND EQUIPMENT:
Land and land improvements 103,792
Buildings 2,319,619
Equipment and fixtures 6,507,571
-----------
8,930,982
Less- Accumulated depreciation (6,691,726)
-----------
Net property and equipment 2,239,256
-----------
DEFERRED INCOME TAXES 562,500
-----------
OTHER ASSETS 1,480,284
-----------
Total assets $11,839,733
===========
</TABLE>
The accompanying notes are an integral part of this
consolidated balance sheet.
<PAGE> 4
WJAC, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET -- SEPTEMBER 30, 1997
(continued)
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 225,954
Accrued salaries and wages 50,432
Accrued payroll taxes and withholdings 48,928
Accrued vacation pay 154,984
Deferred compensation - current portion 12,780
Program rights payable - current portion 86,712
-----------
Total current liabilities 579,790
PROGRAM RIGHTS PAYABLE, less current portion 557,925
DEFERRED COMPENSATION, less current portion 180,366
POSTRETIREMENT BENEFIT COST OTHER THAN PENSIONS 2,186,429
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (Notes 1 and 11):
Common stock, no par value; 37,750 shares authorized, 30,436 shares issued and
outstanding 50,000
Additional paid-in capital 9,435
Retained earnings 8,504,103
Less- Unrealized losses on investments, net of deferred tax expense (10,265)
Less- Treasury stock, at cost (7,314 shares) (218,050)
-----------
Total stockholders' equity 8,335,223
-----------
Total liabilities and stockholders' equity $11,839,733
===========
</TABLE>
The accompanying notes are an integral part of this
consolidated balance sheet.
<PAGE> 5
WJAC, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<S> <C>
REVENUES:
Broadcasting $7,076,445
Hockey team 554,690
Production and recording 42,303
Other 80,624
----------
Total revenues 7,754,062
----------
EXPENSES:
General and administrative (Note 7) 2,248,431
News 1,122,839
Selling 869,387
Technical and production 616,444
Program and promotion 1,234,446
Depreciation and amortization 483,661
Costs of hockey team, including $46,142 of depreciation 681,301
Maintenance - buildings and transmitters 259,498
----------
Total expenses 7,516,007
----------
OPERATING INCOME 238,055
LOSS ON SALE OF HOCKEY TEAM (314,988)
OTHER INCOME, NET 181,312
----------
INCOME BEFORE INCOME TAXES 104,379
INCOME TAXES (112,700)
----------
NET LOSS $ (8,321)
==========
NET LOSS PER SHARE $ (.27)
==========
</TABLE>
The accompanying notes are an integral part
of this consolidated statement.
<PAGE> 6
WJAC, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Additional Unrealized
Common Paid-in Retained Losses on Treasury
Stock Capital Earnings Investments Stock Total
------- ---------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 $50,000 $9,435 $8,938,528 $(71,669) $(218,050) $8,708,244
Net loss - - (8,321) - - (8,321)
Unrealized gain on investments, net of
deferred tax expense of $48,775 - - - 61,404 - 61,404
Cash dividends - $14.00 per share - - (426,104) - - (426,104)
------- ------ ---------- -------- --------- ----------
BALANCE, September 30, 1997 $50,000 $9,435 $8,504,103 $(10,265) $(218,050) $8,335,223
======= ====== ========== ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of this
consolidated statement.
<PAGE> 7
WJAC, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,321)
Adjustments to reconcile net loss to net cash and cash equivalents provided by operating
activities-
Depreciation and amortization 529,803
Deferred compensation (219,884)
Deferred income taxes 25,478
Amortization of program rights 467,970
Payments for program rights (411,538)
Loss on disposal of property and equipment 50,403
Loss on sale of hockey team 314,988
Gain on sale of marketable securities (8,200)
Payment of non-compete agreement (200,000)
Decrease in accounts receivable 167,224
Increase in prepaid pension cost (61,153)
Increase in cash surrender value - life insurance (28,774)
Proceeds from redemption of life insurance policy 76,000
Increase in prepaid expenses (21,328)
Decrease in other assets 52,979
Increase in accounts payable 125,872
Decrease in other accrued liabilities (326,350)
Postretirement benefit cost other than pensions (20,330)
----------
Net cash provided by operating activities 504,839
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (255,777)
Cash transferred to purchaser of hockey team, net of proceeds from sale (92,129)
Purchases of short-term marketable securities (171,602)
Proceeds from sale of short-term marketable securities 399,159
----------
Net cash used in investing activities (120,349)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (426,104)
----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (41,614)
CASH AND CASH EQUIVALENTS, beginning of period 1,727,632
----------
CASH AND CASH EQUIVALENTS, end of period $1,686,018
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid $ 319,908
</TABLE>
The accompanying notes are an integral part of
this consolidated statement.
<PAGE> 8
WJAC, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. ORGANIZATION AND BUSINESS:
WJAC, Incorporated (the Parent), a Pennsylvania corporation, is an NBC
affiliate broadcast television station located in Johnstown, Pennsylvania, and
is the parent holding company of Webworks, Inc. (collectively, the Company).
Webworks, Inc., a Pennsylvania corporation, maintains a site on the Internet
used by advertisers for which it receives a fee.
The Johnstown Chiefs, Inc. (the Chiefs), a Pennsylvania corporation and
previously a wholly-owned subsidiary of the Parent, was sold on September 1,
1997. All of the stock of the Chiefs was sold to a shareholder of the Parent
for $50,000, plus additional amounts if the Chiefs are later sold for the
purpose of moving the team out of the Johnstown, Pennsylvania, area before the
2000-2001 hockey season. An approximate $315,000 loss on the sale of the
hockey team was recognized and is included in other expenses in the
accompanying consolidated statement of operations.
The consolidated financial statements include the results of operations of
Webworks, Inc. for the nine-month period ended September 30, 1997, and the
Chiefs for the period prior to the date of disposition. All significant
intercompany transactions have been eliminated.
See Note 11 regarding the subsequent sale of all outstanding common stock of
the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents.
Marketable Securities
Marketable securities consist principally of tax-exempt bonds, mutual funds and
corporate equity securities. The Company accounts for marketable securities
under Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS 115). SFAS 115
requires certain investments to be categorized as trading, available-for-sale,
or held-to-maturity. At September 30, 1997, all of the Company's investments
in marketable securities are categorized as available-for-sale and are carried
at fair value with unrealized gains and losses recorded as a separate component
of stockholders' equity.
Concentration of Risk and Accounts Receivable
The Company serves the Johnstown, Altoona and State College, Pennsylvania,
demographic areas. Accordingly, the revenue potential of the Company is
dependent on the economy in these areas. The Company monitors its accounts
receivable through continuing credit evaluations. Historically, the Company
has not had significant uncollectable accounts.
<PAGE> 9
Program Rights and Program Rights Payable
The Company has agreements with distributors for the rights to television
programming over contract periods, which generally run from one to four years.
Each contract is recorded as an asset and a liability when the license period
begins and the program is available for its first showing. Program rights and
the corresponding obligation are classified as current or long-term based on
the estimated usage and payment terms. The capitalized cost of program rights
is amortized based on the estimated value and timing of program showings.
Property and Equipment
Property and equipment are recorded at cost and are depreciated using the
straight-line method, except for broadcasting equipment which is depreciated by
accelerated methods over the estimated useful lives of assets as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Buildings and improvements 10
Equipment and fixtures 3-8
</TABLE>
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount should be addressed. The
Company has determined there has been no impairment in the carrying value of
long-lived assets as of September 30, 1997.
Program Barter Transactions
The Company purchases certain programming, which provides advertising time to
the syndicator during the airing of the programs. The estimated fair value of
advertising revenue received in program barter transactions is recognized as
revenue and a corresponding program cost when the airtime is used by the
advertiser. Program barter revenue and expense of approximately $330,000 is
included in broadcasting revenue and trade and barter expense for the period
ended September 30, 1997, respectively.
Trade Transactions
Trade transactions involve the exchange of advertising time for products and/or
services and are recorded based on the fair market value of the products and/or
services received. Revenue is recorded when advertising airs and expense is
recognized when products and/or services are used or received. Approximately
$56,000 in trade transactions was recorded in broadcasting revenue and trade
and barter expense in the accompanying consolidated statement of operations for
the period ended September 30, 1997.
Income Taxes
The Company accounts for deferred taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes" (SFAS 109). SFAS 109 requires the use of the
liability method of accounting for deferred income taxes. Deferred income tax
liabilities and assets reflect temporary differences between financial
statement reporting and income tax reporting. The Company's temporary
differences primarily relate to pension costs, postretirement benefits other
than pensions and differences between tax basis depreciation and depreciation
used for financial statement purposes.
<PAGE> 10
Loss Per Share Amount
The loss per share amount for the period ended September 30, 1997, is
calculated using the issued and outstanding common shares (30,436).
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share" (SFAS 128). SFAS 128 establishes new standards for
computing and presenting earnings per share (EPS). Specifically, SFAS 128
replaces the presentation of primary EPS with a presentation of basic EPS,
requires dual presentation of basic and diluted EPS on the face of the
statement of operations for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997; earlier application is not permitted. Management has
determined that the adoption of SFAS 128 will not have a material effect on its
financial statements.
Use of Estimates in Preparation of the Consolidated Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities as of the date of the
consolidated financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
3. SHORT-TERM MARKETABLE SECURITIES:
Debt and equity securities in the available-for-sale category included in
short-term marketable securities and their respective unrealized holding gains
and losses at September 30, 1997, are as follows:
<TABLE>
<CAPTION>
Gross
Unrealized
Holding
Fair Value Gains (Losses)
---------- --------------
<S> <C> <C>
Debt securities $2,189,731 $ 21,343
Equity securities 1,510,168 (38,697)
---------- --------
$3,699,899 $(17,354)
========== ========
</TABLE>
The net change in the unrealized holding loss was a gain of $34,666 and $75,513
for debt securities and equity securities, respectively. Gross realized gains
from the sale of securities classified as available-for-sale for the period
ended September 30, 1997, were approximately $8,200. For the purpose of
determining gross realized gains and losses, the cost of securities sold is
based upon specific identification. The total cost of short-term marketable
securities was $3,717,253 at September 30, 1997, with $2,168,388 and $1,548,865
attributable to debt securities and equity securities, respectively.
<PAGE> 11
The estimated fair value of debt securities in the available-for-sale category
by contractual maturity at September 30, 1997, is as follows:
<TABLE>
<CAPTION>
Fair Value
----------
<S> <C>
Due within one year $ 974,655
Due after one year through five years 481,610
Due after five years through 10 years 198,909
Due after 10 years 534,557
----------
$2,189,731
==========
</TABLE>
4. OTHER ASSETS:
Other long-term assets as of September 30, 1997, consisted of the following:
<TABLE>
<CAPTION>
Amount
-----------
<S> <C>
Prepaid pension cost $ 555,214
Cash surrender value - life insurance 257,984
Non-compete agreement 100,000
Program rights, less current portion 567,086
-----------
$ 1,480,284
===========
</TABLE>
5. PENSION PLAN:
The Company has two non-contributory, defined benefit pension plans covering
principally all full-time salaried and hourly employees and certain part-time
employees.
The Company's pension benefits are based on a formula which takes into
consideration an employee's compensation and years of service. The Company's
funding policy is to make annual contributions to the plans based upon the
funding standards developed by the plans' actuary. The actuary uses the
projected unit credit actuarial cost method. The Company's contributions for
1997 at least equaled the minimum funding requirements of the Employee
Retirement Income Security Act of 1974.
The Company's actuarial present value of accumulated benefit obligation was
$1,526,656 and included vested benefits of $1,504,711 for the period ended
September 30, 1997.
The following table sets forth the plans' funded status and the amounts
recognized in the Company's consolidated balance sheet as of September 30,
1997:
<TABLE>
<CAPTION>
Amount
----------
<S> <C>
Plan assets at fair value consisting principally of
marketable securities $2,503,917
Actuarial present value of project benefit obligation
for service rendered to date 1,815,819
----------
Plan assets in excess of projected benefit obligation 688,098
Unrecognized net gain (48,906)
Unrecognized net asset at October 1, 1989,
being recognized over 15 years (83,978)
-----------
Prepaid pension cost $ 555,214
===========
</TABLE>
<PAGE> 12
Pension expense for the period ended September 30, 1997, included the
following:
<TABLE>
<CAPTION>
Amount
---------
<S> <C>
Service cost - benefits earned during the period $ 62,682
Interest cost on projected benefit obligation 87,637
Actual return on plan assets (315,376)
Net amortization and deferral:
Actual versus expected return on plan assets 189,270
Unrecognized net asset (10,076)
---------
Total pension expense $ 14,137
=========
</TABLE>
The principal actuarial assumptions for the plans for 1997 were as follows:
<TABLE>
<CAPTION>
Percentage
----------
<S> <C>
Weighted average discount rate used in determining
the actuarial present value of the benefit obligations 7.00%
Expected weighted average long-term rate of return
on plan assets 7.50%
Compensation increases 4.50%
</TABLE>
6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The Company sponsors health and life insurance plans covering certain full-time
employees and retirees. The plans are funded only as benefit payments are
required. Effective January 1, 1995, the Company adopted SFAS No. 106,
"Employer's Accounting for Postretirement Benefits Other Than Pensions,"
whereby the cost of the health and life insurance postretirement benefits is
accrued during the employees active service period.
The plans also include cost sharing provisions, such as co-insurance and
deductibles. The health insurance plan coordinates benefits with Medicare
coverage for participants that are 65 years and older.
The components of the net postretirement benefit cost for the period ended
September 30, 1997, are as follows:
<TABLE>
<CAPTION>
Amount
--------
<S> <C>
Service cost - benefits earned during the period $ 20,969
Interest cost on projected benefit obligation 38,965
Amortization of net gain (65,169)
--------
Net postretirement benefit income $ (5,235)
========
</TABLE>
<PAGE> 13
The status of the Company's unfunded postretirement benefit obligation at
September 30, 1997, is as follows:
<TABLE>
<CAPTION>
Amount
-----------
<S> <C>
Actuarial present value of benefit obligations:
Retirees $ 297,602
Fully-eligible active plan participants 84,340
Other active plan participants 375,366
----------
Accumulated postretirement benefit
obligations (APBO) 757,308
Unrecognized net gain 1,429,121
----------
Accrued postretirement benefit cost $2,186,429
==========
</TABLE>
The principal actuarial assumptions for the plan were as follows:
<TABLE>
<CAPTION>
Percentage
----------
<S> <C>
Weighted average discount rate used in determining
the actuarial present value of the benefit
obligations 7.50%
Assumed health care cost trend rates:
First three years 8.00%
Next five years 7.00%
Thereafter 6.00%
<CAPTION>
Amount
---------
Effect of a 1 percent increase in the assumed health
care cost trend rate:
Increase in the aggregate of the service cost
plus interest cost $ 10,082
Increase in the APBO $101,017
</TABLE>
7. AGREEMENTS WITH EMPLOYEES:
Under the terms of salary continuation agreements with three employees, the
Company is to provide monthly postretirement compensation for a maximum period
of 15 years, or until death, whichever occurs first. The present value of the
future payments required under each of the agreements is being charged to
operations over the remaining service periods of the employees. The total
amount charged to operations related to these agreements approximated $14,000
during the period ended September 30, 1997. Subsequent to the sale of the
Company (see Note 11), two of the salary continuation agreements are to be
terminated in exchange for the transfer of ownership of company-owned life
insurance policies on the employees.
On April 7, 1997, the Company signed a separation agreement with the former
president of the Company, which provided severance of approximately $1,257,000
and the payment of $200,000 for a one-year non-compete agreement. As a result
of the separation agreement, the provisions of the former president's
employment contract were fulfilled.
Certain employees were covered under a collective bargaining agreement as of
September 30, 1997. The agreement was renegotiated subsequent to the sale of
the Company.
<PAGE> 14
8. OTHER INCOME, NET:
Other income and expenses for the period ended September 30, 1997, consisted of
the following:
<TABLE>
<CAPTION>
Amount
--------
<S> <C>
Interest income $166,245
Dividend income 41,511
Loss on sale of equipment (50,403)
Miscellaneous income 23,959
--------
$181,312
========
</TABLE>
9. INCOME TAXES:
The provision for income taxes for the period ended September 30, 1997, is
summarized as follows:
<TABLE>
<CAPTION>
Amount
---------
<S> <C>
Current:
Federal $ 28,400
State 10,000
---------
38,400
---------
Deferred tax provision:
Federal 60,200
State 14,100
---------
74,300
---------
Total provision for income taxes $ 112,700
=========
</TABLE>
Reconciliations between the statutory federal income tax provision and the
Company's effective income tax provision are as follows:
<TABLE>
<CAPTION>
Amount
--------
<S> <C>
Tax provision at the statutory rate (34 percent) $ 35,500
State income tax provision, net of federal tax
benefit 6,900
Non-deductible loss on sale of the Chiefs 129,100
Tax exempt interest income (18,900)
Dividend exclusion (11,900)
Other (28,000)
--------
Total provision for income taxes $112,700
========
</TABLE>
<PAGE> 15
The tax effects of significant items comprising the Company's total deferred
tax assets and liabilities as of September 30, 1997, are as follows:
<TABLE>
<CAPTION>
Amount
----------
<S> <C>
Deferred tax assets:
Postretirement benefits other than pensions $ 896,400
Deferred compensation 79,200
Accrual for vacation pay 63,600
Other 24,000
----------
Total deferred tax assets $1,063,200
==========
Deferred tax liabilities:
Prepaid pension cost $ 227,600
Differences between book and tax basis of property,
plant and equipment 185,600
----------
Total deferred tax liabilities $ 413,200
==========
</TABLE>
No deferred tax valuation allowance is deemed necessary as a result of
management's evaluation of the likelihood that all of the deferred tax assets
will be realized.
10. COMMITMENTS:
In addition to program rights payable as reflected in the consolidated
financial statements, the Company has contracted the right to broadcast certain
programs in the future. The total commitment to be paid under these contracts
to broadcast future programs was approximately $982,000 at September 30, 1997,
and payments will begin primarily at the time of initial broadcast.
11. SUBSEQUENT EVENTS:
On May 8, 1997, the Parent entered into an Agreement and Plan of Merger (the
Agreement) whereby, upon the closing (which occurred on October 1, 1997), the
Parent became a wholly-owned subsidiary of STC Broadcasting, Inc. and the
stockholders of the Parent received approximately $36,000,000, subject to a
calculated net current asset adjustment. The Agreement provided for the
proceeds from the sale of the stock of the Chiefs and approximately $5,400,000
of excluded assets to be distributed to the current shareholders of the Parent.
The excluded assets consisted of cash, marketable securities and accrued
interest receivable.
In October 1997, the Company approved the termination of the pension plan and
the postretirement benefits for active employees described in Notes 5 and 6.
